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Category: Dr. Duke's Blog
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The markets continue to have a bias to the upside, although the pace has moderated significantly. The Russell 2000 Index (RUT) closed up at $576.38, nearing its resistance level of $580-$589, set the last week of August. The Standard and Poors 500 (SPX) closed at $1025.39, near its resistance level of $1035-$1039.

My Sept iron condors are in excellent shape as we wind down toward September expiration with P/L = +$3,210, delta = -$37, and theta = +$137. The Oct condors are much farther from expiration, but are in good shape with a P/L = +$625, delta = -$29, and theta = +$61.

I tried an experiment this holiday weekend. I recorded the closing prices for all of the options in my September and October condors on Friday and then adjusted for the RUT price change (delta) and IV change (vega) this morning and compared those adjusted prices to the market prices. If the market makers had completely adjusted their prices Friday for the three days of time decay, one would expect my adjusted prices to be high since I had not accounted for any time decay. As it turns out, it is about half and half (based on one rough set of data); it appears that most of the time decay was already taken out of about half of these options, but not all of the decay was accounted for in about half of the options. So the lesson is this: if you are establishing any positive theta positions before a long holiday weekend, put them on early Friday at the latest; Thursday is probably better. By Friday afternoon, much, but probably not all, of the time decay has already been factored in the option price.