Considering an Adjustment

The experimental trade for October expiration in running into trouble.  As I write this, RUT is 678 and the the put spread (RUT Oct 660/650)* is only 18 points out of the money.

*Thanks to KC for the correction.

I would consider buying back the call spread (RUT Oct 750/760) and rolling down to a lower strike, but when IV is high (RVX is 38) and the markets are wider than usual, this is not easy to accomplish at a favorable price – that means I cannot collect enough cash to make the trade worthwhile.

Why?  Because the additional cash does little to protect the downside – and that's where the risk lies right now, and because that trade injects upside risk into the position – if the market suddenly reverses direction.  I don't mind being unable to do this because it's my least favorite type of adjustment for an iron condor.

For now, I'm holding this position.  The midpoint between the bid and ask prices for the iron condor is $3.75.  We're losing money but are not yet at the point of reaching our maximum acceptable loss for the position.


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