I was filled for an additional 25 contracts to the May 2010 IWM(65.33 +0.18) Iron Condor position in the paper money account.  This time the fill was for $0.55 credit, a reasonable premium to the original position.  I’ve gone ahead and adjusted my strike prices for the SPY(110.64 -0.19) order that is outstanding; these have been moved to 124/126/112/110 for a $0.50 credit, this order may fill if implied volatility spikes up nicely.

As of this evening the IWM position is profitable to the tune of a whooping $12.50! As with any position with 44 days till expiration, I’m not expecting much from it today. As you can see from the risk profile on the left, this position won’t do much until late April into Early May.  At that point, assuming the IWM hasn’t moved much I may unwind to remove risk and capture a nice return on capital at risk ($15,000).

It’s time to let time do its magic work.

As expected my SPY(110.64 -0.19) order didn’t fill today and the IWM(65.33 +0.18) did.  I’ve placed an order for an additional 25 contracts of the IWM condor at $0.55 credit; if these fill I will be quite happy with that price.  Here is the trade:

SOLD -50 IRON CONDOR IWM 100 MAY 10 73/75/63/61 CALL/PUT @.50

Here is a bit of analysis on the trade.  The strikes are based primarily on the standard deviation of the IWM.  I’ve highlighted the trade range on the image to the right and you can see in the profit graph below that my break even points (including commissions) are slightly outside of 1 σ move down, and just inside a 1 σ move up. For those of you that are now slightly confused, the lower case Sigma, or σ, is a symbol that represents the standard deviation.

These probabilities are based upon the price at May expiration of the IWM.

The probable range of prices IWM will touch between now and then is quite a bit higher; between about 60 to roughly 77.  This is a risk that will have to be managed as we move along and the IWM moves up and down.  My intent is to adjust as little as possible and just let the greeks do their work.  However, should adjustment become necessary, I am not adverse to getting my hands dirty!

Now that I’ve finally gotten everything closed out, it’s time to get the Condors rolling.

I’ve thrown two orders out into the papermoney portfolio for a 50 lot Iron Condors on the IWM(65.33 +0.18) and the SPY(110.64 -0.19).  The IWM Condor should get filled fairly quickly, however the SPY has been put in well above the market/mid price and likely won’t get filled.

Here are the quick details on the orders:

• IRON CONDOR SPY 100 MAY 10 124/126/109/107 CALL/PUT @ .50
• IRON CONDOR IWM 100 MAY 10 73/75/63/61 CALL/PUT @ .50

Both of these positions sit about 1 standard deviation away from the current price of the underlying and provide a fairly healthy return on capital at risk.  These are a lot closer than most of the Condors that I’ve put on in the past.  I’m experimenting with getting closer to the underlying to increase the return, while not dramatically increasing risk.  I’m also planning to exit these rather than letting them expire worthless, so only time will tell how things work out.

The size of the order is a little small based upon the risk management strategy that I’m planning to employ in this account.  Right now, these orders will require about $7,500 in risk capital.  I’m planning to allocate around 1/2 of the account across 4-5 positions in a month.  That means that I need to allocate roughly $10,000-$12,500 to each trade.  I’m fishing right now to see what fills, if the IWM position fills, I’ll likely add another 25 or so contacts.

I did throw a few of these out in another account last week, currently they are up quite nicely and appear to be performing as expected.  I’ll post an update once I get fills etc, along with a little more analysis.

*REMEMBER: This is FAKE money… If it goes poof, then who cares.  :) Read the disclaimer on the website, it is VERY important that you read it – period.

So far, so good!  Today the ‘basket’ of positions I opened on the 23rd gained another $2,500 of so of value.  As the VIX(23.51 -0.74) continues to plummet and the indexes move further into positive territory move money moves into the account.

Most of the positions are now worthless, so I’m planning to spend a little cash on commissions and then close them out. There are only about two weeks left until expiration and given this volatile market, I’m willing to spend some money to make some secured gains!

Anyhow, I’ll post updates as the positions are closed.  Trade smart!

Well, well, well… That was a pleasant surprise closing in the markets today.

Let me update you on the paper money portfolio.

This morning, right after the opening when things were in the toilet I was filled on all five of my positions. Of course, having a great broker I received price improvement all every last one of these.

Here they are in order of execution:

• Sold 200 Vertical SPY(110.64 -0.19) Feb 2008 122/121 Put @ $0.28
  • Credit $5,600
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical QQQQ(46.01 -0.04) Feb 08 40/39 Put @ $0.18
  • Credit $3,600
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical DIA(105.03 -0.06) Feb 08 111/110 Put @ $0.22
  • Credit $4,400
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical IWM(65.33 +0.18) Feb 08 61/60 Put @ $0.21
  • Credit $4,200
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 100 Vertical VIX(23.51 -0.74) Feb4 08 32.5/35 Call @ $0.67
  • Credit $6,700
  • Commissions $(309.95)
  • Margin Hold $25,000

The long and short of it is that I think that fear was at a high this morning, and that the market has hit a short term bottom.

At the close of the market today, I had a paper money unrealized gain of roughly $13,000 on these positions. I plan to keep them around for a while as we hopefully continue up a bit more and then I may exit early to lock in profits in this volatile market.

Please take caution in this market. If you are not comfortable with a trade – do not put it on. It is critical that you understand the risk that you are signing up for, especially in highly volatile markets like this.

Okay… So I think this is the bottom.

Could I be wrong?  Yup… If I am I may blow through about 100K of the paper money account, however I don’t think that is going to happen.  I’m working on a series of positions right now.  They are along a ton of different ‘minis’.

When I get fills on these tomorrow I’ll update the portfolio and describe my thoughts on each of these.  Overall, I think we have hit a temporary bottom and I’m willing to play it.  So here are the tickers:  IWM, DIA, SPY, QQQQ and the VIX.

My orders are as follows:

• Sell 100 VIX Feb 32.5/35 Call Verticals @ $0.45
• Sell 200 DIA Feb 110/100 Put Verticals @ $0.13
• Sell 200 QQQQ Feb 40/39 Put Verticals @ $0.13
• Sell 200 SPY Feb 122/121 Put Verticals @ $0.18
• Sell 200 IWM Feb 61/60 Put Verticals @ $0.14

I’ll post the updates as soon as I get them.  Good luck, hopefully I’m on the right side of this.  If not, it may be quite costly.

Trade smart!