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This has been a tough month for most types of option trading strategies, with the possible exception of being long puts. Even that has its moments, with the kind of intra-day swings we have been experiencing. The market is oversold and yet the rallys wouldn’t stick. Not sure if the one in progress now will. But we don’t want to be around to find out.

With 2 and half days to go, and a relief rally in progress, I bought back the 1180/1150 Bull Put Spread for a debit of 0.70 (recall we sold this spread for a credit of 1.70). With that gone, we no longer have any risk to the downside, and lots to the upside (except for August 1100/1075 position). Market can now proceed with its descent, for all I care!

With this rally, I am also adding more Bear Call Spreads. Specifically, I am selling the SPX 1330/1355 Bear Call Spread (sell SPX 1330 Call, buy SPX 1355 Call). Credit obtained $1.50 per spread. At this moment, IV for front month is 32.30, short call delta is at 9 and short call is 102 points away.

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The inevitable confronts us again. With yesterday’s drop of 38 points on the SPX, our Bull Put Spread short leg of 1240 comes within a stone’s throw of SPX’s closing of 1283. To be exact, a 43 points away with 20 days to go. Delta reached an unbearable 27. Several options came to mind, but these were taken.

The 1240/1210 Bull Put Spread was bought back at a debit of $6.00 per spread. In detail, the SPX July 1240 Put was bought for a debit of $13.50, while the SPX July 1210 Put was sold for 7.50. Net debit was $6.00, effectively closing the position initiated on the 3rd June 2008. See this post. Recall the spread was opened for a credit of $2.00. Net loss for the spread is $4.00 and net loss for the entire iron condor is $2.20 (the Bear Call Spread was closed for a gain of $1.80). See this post.

Next, I opened a Bull Put Spread at 1180/1150 for a credit of $1.75 (Sold SPX July 1180 Put and bought SPX July 1150 Put). I then opened 2 times as many Bear Call Spread at 1370/1395 for a credit of $1.00 per contract (Sold SPX July 1370 Call and bought SPX July 1395 Call). Net profit for entire position so far is $1.95 ($1.75 + 2 x $1.00 - $1.80). Additional margin required per allocation is $2400.

Hope we don’t have to do further adjustments this month.

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