This email is in response to 'Real Life Iron Condor Trade' and 'Meet Our Readers.' This series of trades leads to the least common multiple of my present position in RUT.
I am interested in your (and possibly your readers') thoughts.
Not certain which way to express IC and DD trades, but I think this will be intelligible:
12/16 +20 RUT FEB IC 700/710/830/840 @ 3.50 credit
[On Dec 16, I bought 20 iron condors, collecting $350 apiece]
Concern begins developing over RUT gains, so I bought some insurance.
12/21 +1 RUT FEB C 800 @ 19.40
The cost of this insurance was to be offset by the sale of some 830/840 or 840/850 call spreads.
The market continued to rise and disagreed with me about the value of those spreads.
Ready to put more at risk
1/07 +40 RUT MAR IC 700/710/850/860 @ 3.50 credit
1/14 +50 RUT MAR IC 730/740/860/870 @ 3.57 credit
But not so thrilled with being short that much vega: Thus,
1/14 -10 RUT MAR P 740 @ 10.90
1/14 +10 RUT JUN P 730 @ 27.55
1/14 -10 RUT MAR C 860 @ 6.80
1/14 +10 RUT JUN C 870 @ 20.60
My thinking is that vega largely protects me on the present collapse in RUT price and so I have done nothing. Even so, the 740 strike looks painful. The plan is to begin selling delta and buying gamma somewhere between the 740 and 760 strikes, if RUT reaches 770. I'll try to slough about 60 deltas and snag a gamma for about $3,000. Once the 750 level is breached I shall need to buy 20-30 of the 740/730 spreads.
Below 740 would the time to consider unwinding the diagonals, and I am always looking to unwind the rest at good prices. The remaining reward for FEB is starting to feel small.
The real money (i.e., paying a debit) diagonal is new for me, but felt necessary for continued premium collection.
On 2/1 I was able to buy in 20 RUT FEB 710/700 P for 0.30 and happy to do so. Shortly thereafter (2/3) I bought to close, 20 RUT FEB 830/840 C @ 0.70 and also sold 1 RUT FEB 800 @ 9.00
On 2/3 I put on the new position: +20 RUT APR 730/740/850/860 @ 4.40 which (afterward) I notice has my positions bunched more than I would prefer.
On 2/7 purchased protection in the form of 2 RUT MAR 830 C @ 12.90
On Friday (2/11) I removed risk by purchase of 40 RUT MAR 710/700 P @ 0.40, but there’s still plenty of risk at the 830 strike.
If you want to share a trade, personal incident, or relate how you became an options trader, please send e-mail to blog (at) mdwoptions (dot) com.