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I established my August iron condors today with 20 put spreads at $420/$430 for $0.95 and 20 call spreads at $570/$580 for $1.05, for a maximum potential gain of $4,000 on $16,000 at risk or 25%. Breakevens are at $428 and $572. I will adjust either side if the delta of my short strike reaches 18. I have "leaned" this condor bearish with a position delta of -$46. A more delta neutral position would have used the 580/590 strikes. In my opinion, this market will not rally sufficiently to reach $570, so I chose to receive the larger credit for the 570/580 spreads. The trade-off is that if I am wrong and the RUT continues to move up strongly, I will be adjusting this position early and perhaps closing the call spreads altogether.
Our July iron butterfly at 450/480 and 530/560 was positioned at the market close today with a gain of $1,795, position delta of -$52 and position theta of $152. So this position is still in good shape and we will continue to hold.
Here is a summary of the trades we have completed since this blog began:
June iron condor: $4,600 gain or 29%
June iron butterfly: $1,470 gain or 6.3%
July iron condor: $1,300 gain or 9.8%
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The markets all continued to rally upward today, with the Russell 2000 index, RUT, closing at $509.18. I will be watching to see if this rally is strong enough to break recent levels of resistance: the first is around $515 (RUT hit $512 on May 8 and $519 on January 6), and $536 was the recent high set on June 5. Breaking previous levels of resistance is one of the signs of a strong rally.
I have closed all of my positions at this point except the July iron butterfly on RUT at 450/480 and 530/560. It currently stands at about $1,400 of profit, delta = - $40 and theta = $151. Our theta/delta ratio remains above 3:1, a good spot. So we will continue to hold this position.
I will be looking to establish my August iron condors tomorrow morning.
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The RUT gapped up at the open today and I closed the 560/570 call spreads on our July condor for $0.45, for a gain of $2,800. At the close, we could have closed our 460/470 put spreads for a small net profit on the condor. I will watch the market carefully and close these put spreads if the RUT drops further. I will consider adding a calendar at the short $470 strike as a hedge to allow us to hold this position longer.
The position delta on our 450/480 530/560 iron butterfly has risen to $41 but our theta has risen slightly to $111, with the ratio still over 2:1. We will continue to hold this position.
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I am writing this just before the market closes today; the Russell 2000 index (RUT) stands at $494.03.
I closed the remaining put spreads of my July iron condor today. You may recall we established this trade on June 12 and closed the calls yesterday for a $2,800 profit. With the market's upward action today, I was able to close the put spreads for $2.20, for a $1,500 loss; thus our condor achieved a net gain of $1,300 on 20 contracts, or 9.8% in 12 days. Now, you may wonder why I closed the puts so aggressively when the market was moving away from those spreads. The answer is: whenever I close one half of a condor, I am especially aware that I now am exposed to the market continuing to move in that direction. When I have both my call and put spreads in position, and the market moves strongly downward, my puts are in trouble, but my call spreads are becoming more profitable and hedging my position, i.e., they are softening the blow to my profit/loss. But once I close those calls and take my profit on that side, I am exposed if the market continues downward, so I am aggressive in closing the remaining position in these situations. And 10% in 12 days is nothing to scoff at. At the beginning of this trade, we planned to be in the trade for about two weeks; as it turned out, that was a good prediction.
In the meantime, our iron butterfly at 450/480 and 530/560 stands at about $800 of profit, delta = $33 and theta = $121. Our theta/delta ratio is back above 3:1, a good spot. So we will continue to hold this position.
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Today the markets dropped significantly with the RUT dropping nearly $20 to close at $492.81. Our July condors at 460/470 and 560/570 (See June 12 for details) now have a position delta = $91. Since theta = $105, this is getting a little out of our sweet spot. I will be looking to close the call spreads early tomorrow and will then watch the put spreads closely for an exit opportunity. When you close one side of a condor, you are now exposed if the market continues to move against you, so be very cautious. At today's close, I could still close the puts for less than double the intiial credit, so it isn't out of hand yet.
The iron butterfly we initiated Friday is in an excellent position; the position delta moved from a negative 55 to a positive 21, so we are now even more delta neutral than on Friday. Our theta here is over $105, so this is a much better theta/delta ratio. We will continue to hold this position.
If the S&P futures are looking strong tomorrow morning, I will look to close my call spreads on the condor and possibly even the butterfly in the first few minutes of the market.
