This is a tricky trade because of the liquidity. There’s nobody trading on these contracts yet, so you need to be *very* picky with your orders and fills.
Basically… I’m expecting the market to grind higher. That means a good amount of trend, but not explosive movement all at once.
That means the VIX will probably get hit, and the *actual* volatility will get hit as well… but we’ll see a trend which isn’t fun for iron condors.
This is an unbalanced iron condor. I’m choosing half size on the call spread side of things because the upside risk is the bigger risk here. If we manage to pullback and selloff hard, there’s a ton of support all the way to 2000.
Here’s the trade:
Sell to open HALF SIZE Apr 2190/2195 bear call spread @0.90
Sell to open FULL SIZE Apr 1950/1945 bull put spread @0.70
Those fills should be obtainable… below shows the quotes I pulled for each contract and the mid for each.
I’m not sure you can pull 0.90 on the call spread, and you may have to walk that order down to 0.80. Float the order out, see if you get any takers… if nothing in 15 minutes, then move it down a nickel.
Here’s the risk on this trade:
Really flat deltas, and if the VIX falls further that will help as well.
Now what I expect to happen here is for the upside to get squeezed. If we see a move to 2150, then we will close out the call spread and ROLL it higher, and DOUBLE the size.
Adding that size will NOT increase total margin, but it will increase total upside risk.
Update: 3/4/15
My favorite kind of iron condor– one where I can just sit in it without needing to adjust and I can collect the profits.
The current unrealized gain is between 60-75% of max credit, and there’s more than a month left to options expiration.
The reason this trade’s doing so well is that the market is pulling back just a bit while implied volatility still stays pretty low.
I want to work out of this trade. Now… SPX options are a pain to get filled, so I pulled the bid/ask and mid on both sides of the spread to figure out what kind of fills I can get:
So the best bet here is to place orders at those prices. If you really really need to get out of the trade, then bid 0.40 and 0.30.
If you don’t mind sticking around the trade a bit longer, then just put orders out at 0.30 and 0.20. You may not get filled now, but you probably will by Friday.
Basically, try and exit the iron condor at a price between 0.50 and 0.70… I’d focus on the low side to pull a few more dollars out of the trade.
Margin and P/L
Initial Margin
Spread Width: 10,000
5 Call Spreads @0.90 = 450
10 Put Spreads @0.70 = 700
Margin: 8850
Put Side Profit
10 Enter at 0.70, Exit at 0.25
0.45 Profit
450 Total Profit
Call Side Profit
5 Enter at 0.90, Exit at 0.35
0.55 Profit
275 Total Profit
Total Profit: 725
RoR: 8.2%