The first time Treasury secretary Tim Geithner spoke, the markets were very disappointed by the lack of detail in his presentation and while he was speaking, the market tumbled several hundred points.
Today, he announced the latest details about the bailout package,which could rid U.S. bank balance sheets of up to $1 trillion of bad assets. The highlight of the program is the generous financing offered by the government to persuade private investors to participate. This time Wall Street liked what it heard and the the Dow Jones Industrial Average was higher by almost 500 points.
Here's my conclusion (based on only two data points): Iron condor traders do not like Timothy Geithner. With two speeches, the market has given him one thumbs up and one thumbs down. Iron condor traders offer two thumbs down. Way down.
This was not a fun day for me. I did get to cover two different $RUT May put spreads when they reached prices low enough to cover. But my call positions were in trouble.
I was short the May 430/440 call spread and I bought all of them (using the 3 stage process described earlier), beginning when RUT traded above 420 and ending when RUT reached 430. In their place, I sold May 480/490 spreads – but sold no extra spreads. I paid cash to roll down the position.
Adjusting risk is a necessary part of the game when trading iron condor positions, but that doesn't mean it's fun.