early exit of my april RUT position, new may position opened

Today I decided that it would be a good idea to get a quick $0.10 fill on my RUT position and exit early. I have been filled on a May RUT position to replace the April Trade.

April RUT Review

Sold April 2006 670/680 800/810 Iron Condor for Credit of $0.70

Purchased back on April 17 2006 for a debit of $0.10. Total Credit for trade is $0.60, or 6% ROI.

I’m out, and pocketed a nice return.

New May Trade

May 2006 RUT 670/680 Bull Put Spread
Sell 680 Put & Buy 670 Put
Filled for $0.55 Credit

May 2006 RUT 800/810 Bear Call Spread
Sell 800 Call & Buy 810 Call
Filled for $0.55 Credit

Resulting Final Trade is an May 2006 670/680 800/810 Iron Condor
Total Credit of $1.10

Risk is 11.25% above 800 and 4.1% below 680. Looks like a pretty safe trade. The market has been choppy lately and the RUT will have to hit new highs to break the 800 mark. The economy is pretty strong so the 70ish point cushion on the bottom should hold nicely. Biggest risk is on the top so I’ll keep an eye out as the month moves on.

Update
WOW! It’s been a sky-rocket 2 days for the market. My new may position has already lost over half of the upside protection! I said that the risk was on the top, I just didn’t expect it to run up that quickly. Now it’s really time to keep an eye out. The Russell has gotten some serious legs, and if it continues to rocket up, it will really push this position. Looking at an updated Risk analysis I’ve got about a 28.8% chance of getting in trouble with this trade!

There is still plenty of time, and plenty of trading days between now and the time that I will have to adjust, but if the RUT hits 790 this week, I will pull out. A 40 point gain in 3 days is simply too big to ignore!

Only time will tell, trade smart!

Categories: Options Trading

2 Responses to “early exit of my april RUT position, new may position opened”

Chad Brizendine wrote a comment on April 19, 2006

Ryan,

I truly admire you website documenting several aspects of your life, especially your option trades. I stumbled across your site in search for iron condor information and I have been hooked ever since. I have been in the stock market for a few years which I have not made money, lets put it that way, and I found myself indulging in the flexibility of the options markets. I graduate college in June after which I intend on running condors on indices and commodities for a more consistent ROI. Your commentary is very interesting to me so I was wondering if you could give me a bit more information of perhaps your trade frequency, how long you have been trading ect.
Thanks for your time,
Kind Regards – Chad

ryan wrote a comment on April 19, 2006

Chad, thanks for the kind words, I appriciate it! I’m glad my trade log is helpful to you. A bit of background on me… Well, I’ve been trading options for about 8 years now. I lost more money than I care to discuss when I first started. I drained my first option trading account in less than 2 weeks! After taking quite a few lumps, bumps and big huge bruises, I’ve decided that directional strategies are not my game!

As far as trade frequency, pretty much what you see is what you get. I do have a separate retirement account that I do not journal publicly. Generally I trade once a month, unless adjustments are needed. I monitor the market daily, or at a bare minimum weekly. I tend to rely on my trading platform for alerts (direct to my cell phone) just in case I get side tracked. Overall, I’d say the hardest part is to detach emotionally. In my opinion, that is the primary reason I lost so much money when I started.

That sort of detachment isn’t something you can pick up at a seminar, so if you don’t have it yet, be patient! Paper trade like crazy, be realistic and when your dropping your own money into the fray, make sure your ready!

-Ryan