OPEN: RUT Oct Iron Condor

Here are some new positions I am back in again as they are more conservative. Please size these small in your portfolios to hedge against the volatility of the financial crisis.

Check out today's news on WAMU. JP Morgan has purchased Washington Mutual to rescue the financial markets yet again:
http://biz.yahoo.com/ap/080926/washington_mutual_future.html

RUT Oct Iron condor opened 9/23/08:
Oct 630/620 bull put spread for $1.00 credit
Oct 800/810 bear call spread for $0.55 credit

$1.55 credit/ ($10 spread - $1.55 credit) risk= 18.3% ROI potential with just the Iron Condor alone

I also added for extra protection onto this condor 15 long Oct 600 puts for $3.00 debit and 15 long Oct 820 calls for $0.65 debit. So now my new profit/risk calculation is as follows:

1.55/(10 margin between strikes + 3.00 debit + 0.65 debit)-1.55 credit= 12.8% ROI potential

Here's what it does to my profit graph. Notice how both the bottom and top (left and right of chart) swing upward so no matter which direction the market takes today, I will profit if it moves dramatically. The white curve represents my potential profit today. The green line represents what the profit would be at expiration.

OPEN: RUT Oct Iron Condor

Today I opened the first of 3 ICs for October on RUT.
SOLD -100 VERTICAL RUT 100 OCT 08 640/630 PUT @ $1.00 credit
SOLD -100 VERTICAL RUT 100 OCT 08 800/810 CALL @ $1.30 credit

As RUT moves over the next few weeks, I will look at adding the next ICs. I will keep you posted.

ADJUST: RUT Sep Iron Condor

On 8/12/08 I BOT VERTICAL RUT 100 SEP 08 650/640 PUT @ $0.65 debit
SOLD VERTICAL RUT 100 SEP 08 690/680 PUT @ $1.70 credit

This brings my net credit to $4.20/ risk of 10-4.20= 72.4% ROI potential

Today, I needed to adjust my position again by adding:
SOLD -100 VERTICAL RUT 100 SEP 08 680/670 PUT @ $1.50 credit
SOLD -100 VERTICAL RUT 100 SEP 08 780/790 CALL @ $1.60 credit

This is the last 3rd of the whole position. I have been scaling into this trade as time progressed (1/3 at a time). Now I will hold this trade into Sep., but not to expiration. I will look to leg out of this trade as it moves in one direction or another. Since I am in 3 different ICs, it is best to leg out of this one vertical at a time so the order will fill. It is difficult to exit this trade in one whole chunk because most brokerages would see it as a complex order.

ADJUST: RUT Sep Iron Condor

As RUT continues upward, I removed my bottom bull put spread and sold a new one higher up so I would not have to put more money in the trade, but still be able to reduce my delta exposure and my BP effect (margin). This also increased my theta and vega.

BOT VERTICAL RUT 100 SEP 08 650/640 PUT @ $0.65 debit
SOLD VERTICAL RUT 100 SEP 08 690/680 PUT @ $1.70 credit

This brings my net credit to $4.20/ risk of 10-4.20= 72.4% ROI potential

ADJUST: RUT Sep Iron Condor

Since I was planning on trading RUT in thirds, today I am adding my second 1/3 portion. RUT has moved up since I opened the trade so I am placing another iron condor at strikes slightly higher than before.

SOLD VERTICAL RUT 100 SEP 08 820/830 CALL @ $0.25 credit
SOLD VERTICAL RUT 100 SEP 08 670/660 PUT @ $1.30 credit

My previousnet credit was $1.60, so now my new potential is 1.60+0.25+1.30= $3.15/ risk of 10.00-3.15= 45.9% ROI potential

RUT Iron Condor Sep 650/640 blps & 800/810 brcs

Right after I closed out of my August I.C. on RUT, I put on another for Sep. I will continue to do this same type of trade each month to bulk up my portfolio and hedge against riskier options trades. This strategy is fairly conservative in that the break-even is spread far apart so the stock can fluctuate a lot and still be profitable. This can allow for you to size the overall trade up to 20-30% of your portfolio, as long as you manage this beast. This type of trade should be legged into by 3rds. So I placed the first 3rd today and I will leg into the other parts later if I am still profitable. Size appropriately!

SOLD VERTICAL RUT 100 SEP 08 650/640 PUT @ $1.00
SOLD VERTICAL RUT 100 SEP 08 800/810 CALL @ $0.60

This gives me a huge B/E between 648.63 & 801.87. So the stock can fluctuate dramatically but as long as it stays within this range, I profit. Once the stock starts approaching one of the B/E lines, then I can adjust it and make it delta neutral by adding another vertical or buying or selling calls or puts on it.

exit plan: Get out if my delta risk is 5% of my overall trade size. Get out 1 week prior to expry. Get out if it approaches B/E limit and cannot be managed appropriately for it to be profitable.

Total credit 1.60/ Risk 8.40= 19% ROI potential

RUT Iron Condor Aug 760/770 BRCS & 600/590 BLPS

Today I closed out of my August RUT Iron Condor 760/770 BRCS & 600/590 BLPS for $0.30 debit.

Although I had another week to exit (my exit rule is to get out 1 week prior to expry), I exited today since my delta on the trade was worth -459 and my total delta on the long positions was 10,000 (100 contracts X 100 delta). I
So 459/10000= 4.6%
My delta rule is to exit whenever my delta exposure is 5% of my trade. t was not worth the risk to wait longer to exit (I learned this lesson the hard way last month).

I legged in on 6/26 with the BLPS & 7/1 with the BRCS for a net credit of $1.90.

1.60 profit/8.10 risk= 19.7% ROI

CLOSE: MOS Iron Condor +11.8%

My total credit upon entry was $2.49. I am closing out this trade today as I start to downsize my portfolio for my upcoming 2 week trip.

BOT APR 08 110/115/85/80 CALL/PUT @1.90 debit

2.49-1.90= 0.59 / 5.00 risk = +11.8% in 11 days!

CLOSE: USO Iron Condor -72.2%

On 3/13 I bought the (call diagonal) Apr 91 Call for $2.50 and Sold Mar 90 Call for $0.82.
Total debit of -$1.68.

On 3/19, I adjusted by buying back the Mar 90 & selling the Apr 90 call for a total credit of $1.35 now making this a vertical spread.
-1.68+1.35= -$0.33 cost basis

On 3/20, I converted the vertical to an iron condor by:
Sold BRCS Apr 87/90 call for a credit of $0.62.
Sold BLPS Apr 77/73 put for a credit of $1.12.
-0.33 cost + 0.62 credit + 1.12 credit= $1.41 total credit
New Risk= 4.00 spread-1.41 credit= $2.59

On 3/27, I added on the May 70 long calls to be delta neutral again, this was for a debit of $16.75.
16.75-1.41= $15.34 cost basis

On 3/28, I closed out the long call by selling the MAY 70 CALL for $14.75 credit.
15.34-14.75 = $0.59 cost basis

Today, on 3/31, I closed out the entire trade:
Bought APR 08 87/91 CALL @0.58 debit
Bought APR 08 77/73 PUT @0.70 debit

1.87/2.59 risk= 72.2% loss

So here's an example of how an iron condor can sneak up on you and take a bite out of your "you know what!"

CLOSE: POT Iron Condor +25.3%

On 3/13 I opened the vertical Apr 135/130 put with a credit of $1.07.
On 3/18 I added a BRCS Apr 180/185 call for a credit of $0.85.

My total credit was $1.92.

Today I have closed the trade out as seen below:
Bought APR 08 Iron Condor 180/185/135/130 CALL/PUT for a $1.14 debit.

(1.92-1.14) profit/ (5.00-1.92) risk = 0.78/3.08= 25.3% in 2 weeks

ADJUST: USO Iron Condor w/ Protective Call

So now the stock has turned back down, so I am selling the 16 contracts back.

SOLD -16 USO 100 MAY 08 70 CALL @ $14.75 credit.

My cost basis was $18.16 so now it is 18.16- 14.75 = $ 3.41

As soon as I sold these back, I was able to shave off about 27% of my loss on my trade.

SWEET!

Now, if it goes up again, I can rebuy these calls.

ADJUST: USO Iron Condor w/ Protective Call

This trade was seriously going against me by bouncing up off the 30 day moving average near 80. I had a huge delta risk on this trade at around -$850 which means I was losing $850 a day for every $1.00 the stock moved up! OUCH!

So in using the Analyze tool on ThinkorSwim (TOS), and added 16 contracts of a long call May 70 to hedge against any further loss. This made my trade delta neutral again, increased my probabilities at this time, and gave me some more breathing room.

Bought +16 USO 100 MAY 08 70 CALL @ $16.75 debit


If this trade starts heading back down again, then I will simply sell these 16 contracts back for a credit.

My last cost basis before this trade was $1.41, so now it is 16.75 + 1.41= $18.16

OPEN: MOS Apr Iron Condor

Upon entering this trade, I accidentally sold the wrong strikes at first, so I quickly corrected myself and adjusted accordingly.

Here's what I did:

Incorrect leg:
SOLD -35 VERTICAL MOS 100 APR 08 80/85 CALL @3.40
BOT +35 VERTICAL MOS 100 APR 08 80/85 CALL @3.45
Loss= $0.05

Correct Vertical:
SOLD -35 VERTICAL MOS 100 APR 08 110/115 CALL @.84
SOLD -35 VERTICAL MOS 100 APR 08 85/80 PUT @1.70

Total credit= 0.84+1.70-0.05= $2.49 credit
Risk= 5.00

ADJUST: USO BRCS to Iron Condor

Ok I am readjusting this USO again for added security by turning it to an iron condor.

I traded in my Apr 90 for and Apr 87 so now I have a BRCS at Apr 87/91. I got a credit for this for $0.62.

Then I added a BLPS Apr 77/73 puts for a credit of $1.12.

If my calculations are right, I have reduced risk and increased potential yield as follows:

Original debit of time diagonal: - $1.65
Converted Mar 90 to Apr 90 for a credit of: +$1.35
Traded my Apr 90 for Apr 87 for a credit of: +$0.62
Sold a bull put spread Apr 77/73 for credit of:+$1.12

So my net credit is now $1.41

My risk is now 4.00 (diff. between spread strikes) and 1.41= $2.59

1.41/2.59= 54.4% max profit

ADJUST: POT Apr 135/130 BLPS & Apr 180/185 BRCS

On 3/13 I started with a BLPS at Apr 130/135 for $1.07 credit.

Today it looks like it is retesting the resistance near 164 so since this is the 1 year high, I am hedging myself if this heads back down by adding a bear call spread.

I sold the Apr 180 and bought the 185 calls for a credit of $0.85.

So now, my yield is ($1.07 + 0.85)/($5.00-1.92)= 62.3%

CLOSE: UAUA Iron Condor -24%

On 2/7, I opened this trade as a bull put spread by selling Mar 30 put & buying Mar 25 put for credit of 0.85.

Then on 2/22 I turned it into an Iron Condor by adding a bear call spread to hedge myself by selling the Mar 40 call and buying the Mar 45 call giving me a total credit of $0.77.

0.85 (original credit) + 0.77 (today's credit)= $1.62 total credit
New max risk is 5.00 - 1.62 credit= $3.38

Today, this trade has gone against me so I closed it out for a $2.43 debit.

(1.62-2.43)/3.38= -24% loss in 1 month

ADJUST: UAUA BLPS to Iron Condor

On 2/7/08 , Entrered-UAUA Bull Put Spread (BLPS), I sold Mar 30 put & Bought Mar 25 put for credit of 0.85.

Today we added a bear call spread to hedge ourselves by selling the Mar 40 call for $1.17 and buying the Mar 45 Call for $0.40 giving me a total credit of $0.77. Here we have essentially created an iron condor. This gives you an extra credit and helps reduce the risk of a single vertical going against you.

0.85 (original credit) + 0.77 (today's credit)= $1.62 credit