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Trading was choppy and basically sideways today on lower volume. A positive new home sales report this morning wasn't enough to push the market higher. The Russell 2000 Index (RUT) and The Standard and Poors 500 Index (SPX) closed essentially unchanged at $584 and $1028, respectively.

I track the delta of the short options in my iron condors as one measure of my risk. The delta of the September $620 call dropped to 15 today and the Oct $640 call dropped to 17. A delta of 15 for the Sept $620 call was sufficient for me to sell one of my Oct $620 call hedges at $9.00. This leaves my Sept iron condor essentially at breakeven with a delta of -$80 and a theta of +$175. What those numbers tell us is that the RUT can move up by $1 tomorrow and my position will lose $80, but the passage of one day of time will gain me $175. So I want to manage the position to keep theta much higher than delta.

The Oct $640 call delta dropped to 17, but I left the Nov $640 call hedge in place on the Oct iron condor - a borderline call. This leaves the Oct iron condor with a P/L of -$710, delta = -$24 and theta = +$47. These delta and theta numbers are smaller than for the previous trade because my October position consists of 15 contracts whereas the Sept position has 30 contracts. The Oct position also has far more days to expiration and I have only been in the trade for about one week.

If you are into market forecasting, the question is whether we are going to trade sideways and consolidate for a few weeks or whether a correction is overdue after such a large and quick run upward. Regardless of my forecast, I must be careful to only trade what the market does today and not what I think it will do tomorrow.