May 3, 2017 at 10:19 am #7921
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.
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-$1.80May 5, 2017 at 10:35 am #7924
I can’t get filled at $1.70 credit. How low should I go?
`May 5, 2017 at 12:45 pm #7925
Instead of lowering price too much, I’d look for spreads that are trading between .80c-.90c for entry.May 5, 2017 at 3:53 pm #7926
-Just got a fill at $1.70. I put on each side separately :95c for the CALLS: 75c for the PUTSMay 17, 2017 at 10:06 am #7956
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-$0.30May 17, 2017 at 10:15 am #7960
Igor – a query on the basic detail of your order ticket – don’t you mean 2475/2485 CALLs – not PUTs?May 17, 2017 at 10:20 am #7961
Yes, fixed it. Thanks for the heads up.May 18, 2017 at 9:53 am #7971
We’re going to SELL TO OPEN 1/2 size Bear Call spread to cut NET delta of this position.
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-$1.00May 25, 2017 at 10:51 am #7997
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:May 25, 2017 at 2:32 pm #8001
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?May 25, 2017 at 4:00 pm #8002
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.May 28, 2017 at 2:14 am #8004
Igor – Like Michael I am finding your decisions on May 17 really interesting.
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?May 29, 2017 at 3:38 pm #8005
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.May 30, 2017 at 5:43 am #8009
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!May 30, 2017 at 9:57 am #8019
Thank you for your feedback.
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