SPX 23JUN Iron Condor (529)

IncomeLab Forum Forums Income Lab SPX 23JUN Iron Condor (529)

This topic contains 22 replies, has 4 voices, and was last updated by  Igor 2 years, 2 months ago.

Viewing 15 posts - 1 through 15 (of 23 total)
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  • #7921

    Igor
    Keymaster

    SPX at 2385
    VIX at 10.85

    We’re going to put on an Iron Condor in 23 JUN WEEKLY expiration cycle with 51 days until expiration. We’re selling:

    SPX 2275/2265 Bull Put spread
    SPX 2475/2485 Bear Call spread

    Short strike on the put side has a delta around 15 and the short call delta around 10.
    These are 10 point wide credit spreads.

    Risk Profile:

    Our Max Allowable Loss (MAL) is around 1.5 times total credit. If total credit is $1.70 then MAL is $2.55
    Our first profit target is 50% of credit in 25 days or less.
    We’re going to manage this position when short put delta reaches 25 or short call delta reaches 20

    IncomeLab Order Ticket
    Type Asset Duration Strike C/P
    BTO SPX 23 JUN 17 2485 Call
    STO SPX 23 JUN 17 2475 Call
    STO SPX 23 JUN 17 2275 Put
    BTO SPX 23 JUN 17 2265 Put
    Total Credit: $1.70-$1.80

    #7924

    Igor
    Keymaster

    I can’t get filled at $1.70 credit. How low should I go?
    `

    #7925

    Igor
    Keymaster

    Jim,

    Instead of lowering price too much, I’d look for spreads that are trading between .80c-.90c for entry.

    #7926

    Igor
    Keymaster

    -Just got a fill at $1.70. I put on each side separately :95c for the CALLS: 75c for the PUTS

    #7956

    Igor
    Keymaster

    We’re going to BUY TO CLOSE 2475/2485 here. This will leave 2275/2265 Bull Put spread ON.

    IncomeLab Order Ticket
    Type Asset Duration Strike C/P
    BTC SPX 23 JUN 17 2475 Call
    STC SPX 23 JUN 17 2485 Call
    Total Debit: $0.20-$0.30

    #7960

    Igor
    Keymaster

    Igor – a query on the basic detail of your order ticket – don’t you mean 2475/2485 CALLs – not PUTs?

    #7961

    Igor
    Keymaster

    Yes, fixed it. Thanks for the heads up.

    #7971

    Igor
    Keymaster

    We’re going to SELL TO OPEN 1/2 size Bear Call spread to cut NET delta of this position.

    P/L graph

    IncomeLab Order Ticket
    Type Asset Duration Strike C/P
    STO SPX 23 JUN 17 2440 Call
    BTO SPX 23 JUN 17 2450 Call
    Total Credit: $0.80-$1.00

    #7997

    Igor
    Keymaster

    SPX moved 65 points in one direction since we sold 2440/2450 Bear Call. Now 2440 Call delta is around 30 and we’re going to BUY TO CLOSE this spread and roll it up to 2465/2475. We put on 2440/2450 BCS 1/2 size originally, now we’re going to increase size in the new 2465/2475 call spread to match the size of our Bull Put spread.

    1. BUY TO CLOSE 2440/2450 Bear Call

    IncomeLab Order Ticket
    Type Asset Duration Strike C/P
    BTC SPX 23 JUN 17 2440 Call
    STC SPX 23 JUN 17 2450 Call
    Total Debit: $3.00

    2. SELL TO OPEN 2465/2475 Bear Call

    IncomeLab Order Ticket
    Type Asset Duration Strike C/P
    STO SPX 23 JUN 17 2465 Call
    BTO SPX 23 JUN 17 2475 Call
    Total Credit: $1.10-$1.20

    P/L graph:

    #8001

    Igor
    Keymaster

    Igor, There is somethings that confuse me, on may 17 you close the the CALL side leaving the PUT side, at that point it make sense to me.

    But on the May 18, you re-open 1/2 CALL side with a closer strike.

    When I look at the video and the 5 step process, what I understand is at this point you have to hedge the PUT side?

    #8002

    Igor
    Keymaster

    We never really got to the point where we needed to hedge the put side as SPX reversed around 2350. We did sell 1/2 size call spread to reduce overall NET delta of this position, this way IF we had to hedge the put side, we wouldn’t have to buy too many puts as they were getting expensive with implied volatility spiking.

    #8004

    Igor
    Keymaster

    Igor – Like Michael I am finding your decisions on May 17 really interesting.
    Question-
    On May 17 the SPX had dropped 43 points and the VIX had spiked to 15.59.
    – After closing the Bear CALL side of the IC you were left with the Bull PUT side with a Delta of 22.85% on the short leg.
    – How did you know that the SPX was going to bounce the following day – and things would work out OK?
    – Surely it could have just kept going down with a big opening gap on May 18?

    #8005

    Igor
    Keymaster

    The first thing I did was BTC bear call spread when it was trading around .20-.30c. This spread wasn’t going to decay much more and my put side needed a potential adjustment. This is what this P/L graph looked like at end of the day

    Obviously, I didn’t know if SPX was going to continue lower or bounce back. IF it did continue lower I’d have to buy OTM puts to reduce my NET delta which was around +29. I decided to sell another Bear Call spread, half size to reduce my NET delta exposure before buying puts to defend my Bull Put spread. By selling this call spread, IF SPX continued lower, I wouldn’t have to buy as many puts to defend my BPS because now my NET Delta was very slightly positive.

    It was my intention to close this Bull Put spread and roll it up to a higher strike IF SPX was going to make a sharp reversal and trade higher. That is what I did on 5/25. Now, if SPX is between 2360 and 2430 over the next 15 days, I may be able to take this trade off for around 10% ROR.

    #8009

    Igor
    Keymaster

    Igor – Thanks for all your trouble – that was a great analysis.

    What I am learning from you is that by going a decent distance from the underlying – by using Time to Expiry + Delta – you give yourself plenty of room for logical and effective adjustments.

    You could be changing my Option Selling career!

    #8019

    Igor
    Keymaster

    Thank you for your feedback.

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