Sell to Open SPX 2130/2140 Bear Call Spread @1.15 or higher
Sell to Open SPX 1870/1860 Bull Put SPread @1.10 or higher
We will remove delta if 2060 or 1930 is broken.
Update: October 26th, 2015
2060 hit pretty quickly here.
What we are going to do here is reduce risk by buying calls in January. Since this iron condor is in december, by buying Jan calls we reduce our delta without removing the rewards we receive from time decay.
Current delta on 10 iron condors is 35. So buying a 20 delta call will cut deltas by about half.
Here's the trade:
Buy to open SPX Jan 2160 Call @ 12.00
If you have smaller size, look to the SPY Jan 210 call and scale up until your directional exposure is cut in half.
Now, IF SPX CLOSES ABOVE 2100 here is what we will do:
1. Close out the long calls for a profit
2. Use those profits to roll the call side higher.
3. Roll the put side higher for a credit.
The technicals of the market show that there *should* be a brick wall coming up here for SPX, but we've seen before how the wall of worry can squeeze higher... I don't want it to happen but we just need to be prepared for the possibility.
Update: November 3rd, 2015
And just like that, SPX is above 2100. The speed of this move is not something I've seen in years (2011)... I do think reversion is just around the corner but we need to adjust here.
Here's the trade right now:
As planned here's what we are going to do:
1. Close out the long calls for a profit:
Sell to Close SPX Jan 2160 Call @20.10
2. Roll the Put Side Higher for a credit
Buy To Close Dec 1870/1860 Put Spread @0.20
Sell to Open Dec 1970/1960 PUt Spread @0.80
3. Use the profits from both of those trades to roll the call side higher.
Buy To Close SPX Dec 2130/2140 Call Spread @4.70
Sell To Open SPX Dec 2160/2170 Call Spread @3.00
Do the trades in this order... if all the fills workout fine then there is no additional margin to this trade and the risk/reward remains similar to when we initialized it.
Here's what the risk looks like after:
Update: November 30th, 2015
The sideways action over the past few weeks has really helped this trade out. We've overstayed our welcome to begin with so it's time to bail on the trade.
Buy to close Dec 2160/2170 Call Spread @.50 or lower
Buy to close Dec 1970/1960 Put Spread @0.30 or lower
Trade is sitting around 14% return on current max risk, but when I include the capital for the hedge bought it's around 12% RoR.
Margin Calculations
Sold 10 Put Spreads @1.10
Sold 10 Call Spreads @1.15
Net Credit: 2.25
Initial margin: 7750
With hedge Cost: 8950
Return Calculations
Sold 10 SPX 1870/1860 Put Spreads @1.10
Closed 10 SPX 1870/1860 Put Spreads @0.20
Profit: $900
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Sold 10 SPX 1970/1960 Put Spread @0.80
Closed 10 SPX 1970/1960 Put Sperads @0.30
Profit: $500
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Total Put Side Profit: $1300
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Sold 10 SPX 2130/2140 Call Spread @1.15
Closed 10 SPX 2130/2140 Call Spreads @4.70
Loss: -3550
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Sold 10 SPX 2160/2170 Call Spreads @3.00
Closed 10 SPX 2160/2170 Call Spreads @0.50
Profit: +2500
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Total Call Side Loss: -1050
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Buy to Open SPX Jan 2160 Call @12.00
Sell to Close SPX Jan 2160 Call @20.10
Hedge Profits: 810
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Put side profits: 1300
Call side loss: -1050
Hedge profits: 810
Total profits: 1060