Share a Trade. One Week Update

It’s
time for the first of my planned Tuesday updates concerning the September RUT
iron condor I bought
one week ago, Aug 19, 2008.

To repeat
the trade:  Bought 10 lots of the RUT Sep
670/680; 780/790 iron condor

Bought 10 RUT September iron condors when RUT was priced near 732:

Bought 10 RUT Sep 670 puts;   Sold 10 RUT Sep 680 puts;
credit $1.50

Bought 10 RUT Sep 790 calls;   Sold 10 RUT Sep 780 calls;
credit $1.50

Credit per iron condor is $3.00, or $3,000 total for 10-lots.

Target: Earn $105, or 15% of the $700 margin requirement for each
iron condor – within two weeks.

 

Update

Monday’s
volatile RUT decline makes it more difficult to close out the position with my
target profit.  Of course, I didn’t
expect to have the opportunity to earn 15% so quickly (it's only 5 trading days) – thus, it’s not too
disappointing.  My current concern is
that RUT may decline so far that it becomes necessary (to limit losses) to
cover the position if it reaches the maximum loss I’m willing to take on this
trade.  That loss is 125% of the profit target,
or $1.30 per iron condor. That’s not an immediate problem because that means
paying $4.30 for the iron condor and we are not yet threatening that level.

As
Monday’s trading was drawing to a close, the position looks as if it can be
covered for about 2.40 to 2.50.  Right
now, the position is profitable, but it’s too early to close.  I’ll try to report again next Tuesday (I’ll
be out of town and may not be able to do so).

So
far, so good.

69

2 Responses to Share a Trade. One Week Update

  1. Roland 08/26/2008 at 7:20 PM #

    I’m not following why you are aiming for a specific profit target on this trade.
    I think it would be more educational to follow a trade that reflects how you actually go about deciding how to close out a trade.

  2. Mark 08/26/2008 at 8:12 PM #

    Hi Roland,
    This trade is an experiment.
    See tomorrow’s blog: Closing an Iron Condor Position for a more complete reply.