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• Stephen Cooper

Home >> Stock Forums >> April 07 RUT Iron Condor

April 07 RUT Iron Condor

holzie said: "The March iron condor was a 60% loss, pretty nasty hit. Ironically, the very original iron condor position would have been 30% profitable, so basically I got whipsawed by the market pretty nicely that time. The game is slightly different this month. Since volatility is back, we are going to assume that we might get short-term whipsaw on our position but the index price should historically end up +/- 30 points where it is today. We will also increase the standard deviatons from 1 std to at least 1.5 on each side plus a tad. This means selling deltas of 0.07 on the calls and 0.05 on the puts. The order I will be putting in for Monday is as follows (sizes scaled to 1 contract for illustration purposes only): -1 RUT April 840 call +1 RUT April 850 call credit 0.50 +1 RUT April 660 put - 1 RUT April 670 put credit 0.40 ----------------------------------------------- Cash at risk $1,000 Credit $90 Yield 90/1000 = 9% Rules: No adjustments, hold till expiration. I am choosing RUT over SPX because with such small credits, execution will be crucial and with the SPX we would have to either time the markets, increase risk, or lower premium requirements, which I am willing to do neither. Last note, if you lost money this month, DO NOT try to make it ALL back in one trade. This is not how it works. Holz."

JCast3 said: "question for you....why do you feel you'd have to time the market with the SPX? is it because volatility is rather high right now?"

holzie said: "[QUOTE=JCast3]question for you....why do you feel you'd have to time the market with the SPX? is it because volatility is rather high right now?[/QUOTE] No not because of that, it's about the fills. The quotes for credits you receive for spreads is based on something called "MARK" , which is averaged bid and ask for each option, so if you want to get a fill RIGHT NOW at let's say 0.50 credit, the fill would be realistic somewhere around 0.35-0.40, especially on he SPX. Why especially on the SPX, well the SPX is only traded on 1 exchange AND it is not electronically filled, it is filled by a market maker, who always try to get you to lower your credit requirement. So when you deal with a situation where you want a 90%+ probability condor, the credits are so low that it gets to a point when it is not worth, even the smallest risk. So with the SPX the way I always got around this was to "time" the markets and waited until the market went up a few points to get filled and then I had to wait for the double down to get filled on the puts.....sometimes this took several days to have a final position. The RUT has been really great at getting my fills and it is not unusual to get filled right at the MARK or 0.05 below on the spot right there and then. The disadvantage RUT has is that the strikes go in 10 point increments and the SPX can be traded based on 5 point strikes. Holz."

A Cake On said: "I don't know if I feel completely confident using the Iron Condor at this time while the market is pulling back like it has. Some people that use Fibonacci Analysis are guessing that the market could continue to pull back pretty hard. Have you thought of just maybe selling a vertical 850/860 spread to leave the downside open? I got beat up on the March condor as well, but closed them out immediately when the down pulled back 176 points on that terrible tuesday before it hit the 500 + point pullback mark. I then opened bought some puts and ran a few credit spreads on NDX SPX and RUT."

holzie said: "[QUOTE=A Cake On]I don't know if I feel completely confident using the Iron Condor at this time while the market is pulling back like it has. Some people that use Fibonacci Analysis are guessing that the market could continue to pull back pretty hard. Have you thought of just maybe selling a vertical 850/860 spread to leave the downside open? I got beat up on the March condor as well, but closed them out immediately when the down pulled back 176 points on that terrible tuesday before it hit the 500 + point pullback mark. I then opened bought some puts and ran a few credit spreads on NDX SPX and RUT.[/QUOTE] Yeah, I don't see anything wrong with not opening the put spread..afterall, it's just poultry credit anyways and you WILL loose sleep. So I think you are right."

bklambco said: "Huh...So you RUT is working out for you after all? RUT can be ok as long as you are aware of its characteristics and how it moves. I dont have a position for April yet, was thinking 1460/1470 it was .85 right now and SPX is at 1400. I might take a look at RUT too. It just seems SPX orders are really hard to get with out calling or chat with TOS to push it through. I am all ears if you or anyone has some good ideas. [QUOTE=holzie]The March iron condor was a 60% loss, pretty nasty hit. Ironically, the very original iron condor position would have been 30% profitable, so basically I got whipsawed by the market pretty nicely that time. The game is slightly different this month. Since volatility is back, we are going to assume that we might get short-term whipsaw on our position but the index price should historically end up +/- 30 points where it is today. We will also increase the standard deviatons from 1 std to at least 1.5 on each side plus a tad. This means selling deltas of 0.07 on the calls and 0.05 on the puts. The order I will be putting in for Monday is as follows (sizes scaled to 1 contract for illustration purposes only): -1 RUT April 840 call +1 RUT April 850 call credit 0.50 +1 RUT April 660 put - 1 RUT April 670 put credit 0.40 ----------------------------------------------- Cash at risk $1,000 Credit $90 Yield 90/1000 = 9% Rules: No adjustments, hold till expiration. I am choosing RUT over SPX because with such small credits, execution will be crucial and with the SPX we would have to either time the markets, increase risk, or lower premium requirements, which I am willing to do neither. Last note, if you lost money this month, DO NOT try to make it ALL back in one trade. This is not how it works. Holz.[/QUOTE]"

rrvball said: "Holzie, I too thought you were never going to trade RUT again. I also noticed that the spreads on the SPX were quite wide and would make it difficult to get any credit for PUT spreads far OTM. So, I see you jumped back to the RUT. Did your trades get executed yesterday?"

bklambco said: "Guess it's called follow the money, gotta be flexible. :th_coolio: [QUOTE=rrvball]Holzie, I too thought you were never going to trade RUT again. I also noticed that the spreads on the SPX were quite wide and would make it difficult to get any credit for PUT spreads far OTM. So, I see you jumped back to the RUT. Did your trades get executed yesterday?[/QUOTE]"

holzie said: "[QUOTE=rrvball]Holzie, I too thought you were never going to trade RUT again. I also noticed that the spreads on the SPX were quite wide and would make it difficult to get any credit for PUT spreads far OTM. So, I see you jumped back to the RUT. Did your trades get executed yesterday?[/QUOTE] Yes the RUT 840/850 calls. I am not entering the puts."

holzie said: "[QUOTE=bklambco]Guess it's called follow the money, gotta be flexible. :th_coolio:[/QUOTE] Yes, that's exactly why I stayed with RUT. The SPX just doesn't yield much on the call side in my comfort range, minus the execution -- not worth it to me."

bklambco said: "It is the "Execution" that bothers me the most. When you are in a bind and cant get out that is very pain full. When you want out at the current price you want out fast and now. I'm used to Forex executions they gaurantee them and no slippage. [QUOTE=holzie]Yes, that's exactly why I stayed with RUT. The SPX just doesn't yield much on the call side in my comfort range, minus the execution -- not worth it to me.[/QUOTE]"

JCast3 said: "you guys arent kidding about the SPX execution....ive had a vertical spread in in all day, and the mark has been .20 HIGHER than my limit price for like 2 hours and it still hasnt executed, such BS.... ok, now the mark is like .50 over my limit and it still hasnt executed :angry:"

JCast3 said: "i guess i should take that as a blessing in disguise that my order didnt execute seeing as the market has shot back up....i will try again tomorrow...."

holzie said: "[QUOTE=JCast3]you guys arent kidding about the SPX execution....ive had a vertical spread in in all day, and the mark has been .20 HIGHER than my limit price for like 2 hours and it still hasnt executed, such BS.... ok, now the mark is like .50 over my limit and it still hasnt executed :angry:[/QUOTE] When this happens you should do 1 of 2 things: a) re-submit your order b) better - just call the trade desk and they will make it happen Like I said, the SPX is harde(er) on executions, so it's not that great for high probability iron condors/spreads, but I would still leave it as a great back up. I think that the market is more afraid of small and midcaps runups than large cap runups (SPX) so ironically, I see more rationality in RUT right now.... I have a very very tiny position in RUT right now and the main trades are in owning 2008 LEAPS in BAC, INTC and CSCO, which I bought cheap few days ago. I sold April calls against them, giving me income of 8-11% each. These are called diagonals and I am gonna post on them separately. Holz."

A Cake On said: "Wow, I wish I would have read this when I opened my condors. I am taking a beating on the SPX condor now. I am having the same trouble getting filled while trying to exit. Good to know that I can call the trade desk and get better assistance. I am afraid of getting jammed up becuase it is bleeding pretty bad right now. Hopefully I can get out on the pullback (hope there is one). No better way to learn than to lose a couple grand in one fell swoop."

roarflolo said: "Where are your shorts?"

A Cake On said: "1350 and 1470."

holzie said: "What was the settlement price? Sorry I was in Europe for 3 weeks.."

drdan said: "Almost emailed you Holz to find out where you were??? Glad to have you back. Was it a fun trip or a business trip or both?"

holzie said: "[QUOTE=drdan]Almost emailed you Holz to find out where you were??? Glad to have you back. Was it a fun trip or a business trip or both?[/QUOTE] Nah man, April was a bad month for me. My mother died at 46, she had an aneurism, so I went to Europe to be with the family. I still have school term papers raging and i am deploying for 4 months on May 5th.....so you combine it all and I just wasnt around... Interesting market we're having huh? All I have is my old diagonal spreads using leaps to get Holzie some change for feel better toys....like a new laptop (courtesy of HOG April 65 short calls :) ) How have you been? Holz."

Rbreb13 said: "Sorry to hear of your problems Holzie. But its good to have you back. I've missed your insight."

drdan said: "[QUOTE=holzie]Nah man, April was a bad month for me. My mother died at 46, she had an aneurism, so I went to Europe to be with the family. I still have school term papers raging and i am deploying for 4 months on May 5th.....so you combine it all and I just wasnt around... Interesting market we're having huh? All I have is my old diagonal spreads using leaps to get Holzie some change for feel better toys....like a new laptop (courtesy of HOG April 65 short calls :) ) How have you been? Holz.[/QUOTE] Sorry to hear of your mother's passing. Where are you going in May - the big sand box? I have not been in the market at all, just a few simple bull put credit spreads on SPX that I actually closed early because of the big boom up. My only holding right now is my long term AAPL and I am thinking of closing her tomorrow after the nice gains from earnings and waiting the summer out. My businesses are going very well and taking a lot of my time right now. I'll still keep an eye on the market I always do (have to) and I will always be placing simple credit spread trades on the indices but in much smaller quantities because I just will not have the time to trade. Again, glad to have you back, will you be able to stay after being deployed?"

Handy Chandra said: "Hi Holzie, Sorry to hear that your mom is passed away. It's nice to see you back and waiting your valuable insight. Regards,"