As of this morning, I’m still holding tight on the current RUT(831.11 +0.00) play.  As it sits right now, my order is out there to close this position for a credit of $0.15.  I don’t have any plans to cancel that order.

So far this morning the market is cooperating and moving up.  We will see if that continued.  As the days tick away, time value disappears and the short options lose there value.  That helps my position out nicely as I’m getting closer and closer to a fill each day.

Assuming the market remains strong today, I fully realize that I’m very likely giving away $0.15 per contract.  However, I’m still not convinced that this market is going to hold through the week. What I do not want to see is a major drop on Friday that exposes me to extreme expiration risk.

Personally, that risk is larger than $0.15 per contract.  I’d like to keep my cash and move onto next week.

Anyhow, good luck.  I’ll keep posting my thoughts as the week develops.   Trade smart!

On Christmas day, just three short days ago, I wrote about the great problem of having the market skyrocket up in one direction to make a position completely profitable.

Over the last three days, the RUT has dropped about 20 points or so thereby removing any possibility of buying myself out of the 670/660 vertical spread today for ~$0.10.

However, I’m not worried about it one bit. If you read the article on Christmas day and looked over the criteria I am using to make the decision, you should understand why. Even though the the RUT has dropped to right around 770 today, I still have a 100 point cushion on the trade. Furthermore, if I pull up my trusty tools from thinkorswim, the calculated probability of the RUT expiring below 670 on Jan 21, 2008 is about 1.5% today. Top top it all off, I originally entered the position when the RUT was at 750!

What does that mean? Well, first off all it means that I’m in a fairly safe trade. Secondly, it means that unless I really need the margin dollars, I’m buying the position back for quite a bit more than the risk associated with the position. With the RUT this far away from my strike prices, it is important to me to look at the percentages. And finally, I don’t think that the recent world events changed the market dynamics enough to cause panic, yet.

We’ll see over the next few weeks how it all plays out. I have the position open in my papermoney and personal account.

Today I was filled on the Call side of my March 2006 RUT Iron Condor.

• Mar 2006 RUT 780/790 Call Spread; completing an Iron Condor
• Sold 780 Call & Bought 790 Call

• Opened: Sold on 2/23/2006 for $0.15 Credit

• Reason: This completes a 660/670 780/790 Iron Condor. Using a three month window, the strike prices of 670 and 780 are more than two standards of deviation out so I’m feeling pretty confident with this one.
• The Russell is at 738 today and looks like it is still in the choppy pattern.
• Notes: The money is only on the table for 21 days, so this one should be nice. ROI will be about 5.5% , risk is $1000 per contract.

• Risk: As stated in the initial trade, the risk is about 3.7% on the bottom and 5.7% on the top, that is a total of about 9.4%, meaning that I have > 90% chance of profitability.