A quote from my post yesterday.
I’m going to hold the paper money position overnight and see what happens? It might be a good move, it might not be. If it is a disaster, I’ll close early in the AM. If your trading those trades, you need to make your own decision ? I walked with my cash on the line :).
Notice how I said I walked with my cash on the line. There is a really good reason for that, and I’m very happy that I did. The papermoney account got just flat destroyed today. I left yesterday after posting to spend the day with my wife for her birthday and the market continued to spiral down. The Russell took a dive, almost to 670 and when I woke up this morning the papermoney account was down to about $70,000 in “liquid” capital. I waited a bit and closed the position later on during the trading session. After closing the RUT Iron Condor the papermoney account is down to $77K liquid, and about $89K cash.
How did this happen… Well the market continued to move down and broke through every support level I was counting on. There is a lot of FUD (Fear Uncertainty and Doubt) out there right now – as a result its been really dicey! Quite frankly I am very surprised that the market fell as far as it did; I am expecting a bounce and ideally we will be able to profit from it!
One of the key items here is risk management. That is the main reason that I took my money off the line yesterday, and I’ve taken the papermoney off today. At this point in the week, there is just too much risk out there for me to be able to sleep well at night. It is important to make your decisions based upon your risk tolerances and the hard data that is available in the market at that time. Here is the RUT trade from earlier today:
- Bought 25 2/2/1/1 RUT June Iron Condor 740/750 680/660 @ $9.03
- Cost ($22,575.00), Commissions ($234.95)
- Total Loss $6,120.15 – $22,809.95 = ($16,689.80)
- Account Balance: $89,615.95
- Cash on Hand: $39,615.95
- Margin: $50,000
When I put this trade on, the market had come off its highs from the morning and looked to be following a the same pattern from yesterday. As a result, I closed the position and took a big loss. It just so happens that by the close of the market today I could have unwound the RUT position for almost half of price I paid. Did I make the wrong decision, I don’t think so based upon the information available at the time. In retrospect, I’d have loved to not even opened the position 
We could have instead purchased a put vertical and made 200% or so on our money! Of course, hindsight is always 20/20 – and if I knew what was going to happen tomorrow today… well you can only imagine.
What to do from here? Well, there are a couple of options, and quite frankly I’m not sure which direction I’ll be pushing for in the coming months. I’m sure that Iron Condors will continue to be a staple of the portfolio, but I may add a few volatility plays into the book. I’ve got some research that must be completed before committing any capital. Enjoy the rest of your week, and trade smart! It’s possible that I’ll be adding some new plays later this week – keep an eye out…
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