Star InactiveStar InactiveStar InactiveStar InactiveStar Inactive

Several favorable economic reports this morning failed to impress traders and the market slid in low volume trading. But buyers came in to push the market back up and in most cases had turned the red ink into positive gains by market closing. The DJIA closed at $9581; SPX closed up by $3 at $1031 and RUT closed essentially unchanged at $583.77. The RUT chart has been trading sideways between $572 and $588 for the past four or five sessions. The question on everyone's mind is whether it will suddenly break out up or down, or just trade sideways to consolidate for a while.

I had begun to take off my long call hedges yesterday, and during the market's weakness this morning, I removed the balance of the hedges from both my Sept and my Oct condors. This morning, the deltas of my short Sept $620 calls had dropped to 11 and the short Oct $640 calls had dropped to 15. I sold the Oct $620 calls at $7.50 and the Nov $640 calls at $8.90. As the market rebounded, the deltas of the short Sept $620 calls and the short Oct $640 calls had increased to 14 and 16, respectively.

My Sept condor now stands at a P/L of +$130, delta = -$151, and theta = +$210. This is a higher delta than I would like; I may end up buying long calls again to hedge this position. This volatile market has a way of jerking these positions around. At this point, I have spent a total of $911 on both put and call hedges for this condor, but a potential gain of $3,800 remains.

My Oct condor now stands at a P/L of -$650, delta = -$52, and theta = +$60. Removing the Nov call today cost me $200 (my insurance premium). Aggressively hedging my iron condors does reduce my potential gains, but protecting my downside on these positions is crucial to long term success.