July Iron Condor Opened

Filed under: iron condor — optionwinner at 12:18 pm on Thursday, June 5, 2008

Last Thursday (29 May 2008), I initiated the Bear Call Spread of the Iron Condor for a credit of $200 per contract. As you know, I like to leg in one spread at a time. Just to be clear, I submitted the BCS as a complete order - I did not leg in the 2 parts of the spread. I used to leg into a spread when I was younger, and it was quite rewarding, at times. I shall share with you the method I used to leg into a spread on a rainy day (rainy day = a day where I get writer’s block). Back to the Iron Condor…

It was about 50 days out and a vertical spread of 1495/1520 yielded a credit of $200. That day saw the SPX hit a high of 1406. The trade was probably executed when it breached 1400. I’m not certain as

I was watching TV at the time. That’s the wonderful thing about doing option spreads in general and iron condor’s in particular. You do your homework half an hour before market opens, put in the trade and walk away.
Any way, some rationale for the trade. SPX breached the 30D SMA to the downside for the first time since mid-April. Prior to that, it fell through the trendline that had been established since March. Stochastics was oversold and I waited for a retracement to put in the spread. The timing was also right - 45 - 55 days from expiry. After the trade, the SPX went over the 30D SMA and spent a day there before coming down hard.

I could have been wrong and the SPX could have surged higher. But it did not matter. Iron Condors are non-directional. My technical analysis simply helped me maximize my credit, and hopefully result in a shorter duration winning trade.

The spread at 1495/1520 was more than 1 standard deviations away. Delta was 9 when I took the trade.

The Bull Put Spread was established on the 3rd June 2008 at 1240/1210, for a credit of $200 per contract.

More about the BPS in the next post.