Current August Positions (Target 16.3%)

Filed under: iron condor — optionwinner at 10:53 am on Tuesday, July 29, 2008

Another big down day for the indices, with SPX dropping a whopping 23 points!

Technically, the SPX made an attempt at the 30 SMA and failed and has dropped almost 60 points in 3 days. Right now, it may find support on the downtrend line formed since early May (see chart). A bounce here, and a thrust higher will form a higher low, which would bode well for the SPX and for the market as a whole. A failure here may find the SPX breach 1200.

What about our positions? In short, they look great !

First, our Bear Call Spread at 1330/1355. We sold the August SPX 1330 Call and bought the August 1355 Call for a net credit of $1.50. Yesterday’s drop has made that spread drop to about 0.425 (mark). It would have been lower if not for the rising IV (now at about 23). Delta has also dropped to a safe 4. At this moment, with 16 days left to expiry, the short call at 1330 is almost 1.5 standard deviations away. We will continue to hold this and possibly let it expire worthless (yippee).

Next, our Bull Put Spread. It seems like a really long time ago when we opened this position. We initiated this spread on the 7th July, about 38 days from expiry. So much has happened since! The index reached for the skies and fell like a rock! At one point, the short put was almost 200 points (190 to be exact) from the market. Should we have closed it then? Well maybe, but I wanted it to expire worthless. By the way, that position was opened for a net credit of $2.00. Currently it is marked at $0.60.

If the entire iron condor expires worthless, our return this month would be 16.3% (nice). Let’s see how this pans out.