RUT (Russell 2000 Index) Iron Condor initiated on 18 Dec 2007
Trade Summary
RUT at 742.85 (+3.82)
29 days to Jan08 expiration.
Sell RUT Jan08 810 Call
Buy RUT Jan08 820 Call
Sell RUT Jan08 680 Put
Buy RUT Jan08 670 Put
(1 contract condor)
For a net price of $2.55 Credit
Trade Analysis
Be patient with this trade but try to have it filled before market closes today. We've been queuing for this trade for the whole morning and finally managed to get it filled at $2.40. Its current mid-price is $2.45. This price will be unattainable in a few days' time. With only 29 days left to expiration, this iron condor is priced very nicely. This is the second RUT iron condor that we put up for Jan08. I gave up trying the SPX after 2 days and personally I prefer the RUT better.
Looking at the P&L chart below, we can see that our breakeven points are at 812.4 on the upside and 677.6 on the downside. This position has a probability of about 71.56% to be successful. This is a higher probability than the 1 standard deviation that we always look for. This iron condor has a profitable range of about 134 RUT points. At current price, RUT is currently about 67 points away from our short call and about 62 points away from our short put.
The technical aspect of the RUT is somewhat bearish. From what we can see from the 6-month daily chart below, there is only one viable support at the 736 level.This support was tested twice in the past 6 months. Once on 16 Aug, when RUT touched 736 and bounced off. The second time was on 26 Nov when RUT closed at 735 and then bounced off the next day. It looks certain that the 736 level is going to be tested again very soon. Will RUT hit 735 and then bounce off again like it had done for the past 2 times? Or will RUT break the support and go down lower? Today's close will be a good gauge of what is to come.
This iron condor has a risk/reward ratio (R3) of about 3.17, which makes it a 'high R3' iron condor. What this means is we have to be watchful over this position and be prepared to make adjustments when the RUT is trading at about 3% from our short options. In this case, we shall watch out when RUT is trading at 30 points away from our short options. We have to be prepared to make adjustments or take losses when RUT is trading at more than 780 or less than 710.
Total margin required: $745
12/24
BTC the 680/670 PUT verticle for .13
originally sold for 1.45
total realized credit: 1.32
810/820 CALL verticle: 1.10 credit
currently trading around 3.90-4 dollars
1.32 + 1.10 = 2.42 currently loosing approx. 1.50 on this condor.
placed a stop order in a 4.55 (will limit my total loss to approx $200 for the codor)
1/04/08
btc the 810/820 CALL verticle for .10
originally sold for 1.10
total realized credit: 1.00
condor total realized credit = 2.32
7.45 margin 2.32 credit = 31% return
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