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HEDGING THE IRON CONDOR?

HAVING TROUBLE PRINTING?
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HEDGING YOUR IRON CONDOR?

We're in reasonably good shape for this upcoming week with the notable exception of the SPX bear call spread. We have about a 17 point cushion. Based on Friday's closing numbers, we could close the position for less than a buck. That would certainly insure us a profitable April cycle.

Keep your eyes on the position and don't let it get away from you. The market has upside momentum, but there are a lot of numbers due out this week - and they all can't be good. The recent move up has not been on great volume, and low volume moves tend to fail. Also, we're approaching resistance at 1460. It should make for an interesting battle between buyers and sellers. I'm really rooting for the sellers. I'm sure part of that is wishful thinking.

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Mike -- I want to make your Iron Condor strategy even safer/conservative for about 50% portion of my principal. In order to do that, I am thinking of using half of the option premium we get to buy a long straddle.

So for example, if I put a Iron Condor on MID - Bear Call Spread 920/910 for .60 credit, Bull Put Spread 780/770 for .60 credit, for 20 contracts, I get $2400 in premium. Then, I use $1200 to buy 20 930 calls @ .25 and buy 5 740 puts @ 1.00. I am still being non-directional. But if the market moves a lot in any one direction, I have a chance to reduce the loss or even make some more money.

Also, when the market goes down, the VIX and the option premiums increase dramatically, making the puts more costly. The market has gone up quite a bit and seems ripe for a correction. Would it make sense to hold off on putting any put spreads?

I have put on a MID BCS 920/910 for a .60 credit today, but didn't put on a put position since I felt it would be better to wait for a correction and then put on the put side later. Is trying to time the market this way worth it? Thanks - Jignesh

Dear Jignesh -- I like the concept, but you have to decide how you're going to use the $1,200 you've designated for hedging options - and IF it's worth it. How many options will $1,200 buy -- and where?

The 740 puts you would buy are another 40 points away from the short strike. How much of a hedge they would provide is tough to calculate. It might help some if there is a large move -- as long as there still some time left in the option cycle. If not much time remains, the hedging long puts won't have any value. The 930 calls are a little closer (only 20 points away from the short strike) and might be a bit more help.

Perhaps it's better to buy fewer hedging puts, but at a higher strike where it will do some good. If you're concerned about a possible trend, you could bias the number of long options in that particular direction.

Regarding your decision to only put on the MID 920/910 bear call spread, you took the calculated risk of possibly missing the bull put spread. You either weren't satisfied with the strike price or the amount of premium available at that level. So, you opted to wait for a pullback to put on the bull put spread. It's true that the VIX will likely go up on a pullback - IF there's a pullback.

Thus far, the market has continued up. There are five weeks left to May expiration. The pullback may still come. But, if it doesn't, you may have to be content with having only a bear call spread. Traders in this position have a tendency to compromise their safety levels and put on ill-advised bull put spreads to complete the Iron Condor. Be careful. If the market has moved up, you can look for a higher support level, but you find yourself on a slippery slope when chasing a bull put spread.

Siamese Condor Trade Update
After a week, the XEO (OEX) has moved up to 665.35. We have been helped by the reduction of volatility, but hurt by the increase in delta on our short 660 call. Over five dollars, that used to be time value, is now intrinsic value - and intrinsic value does not erode away.

At Monday's open, there will be two more days of time erosion coming off the entire 660 put and the appx. $1.80 time value left in the 660 call. Do the math and see if it's worth closing the position and taking a small profit, or let it run a little longer anticipating a pullback closer to our 660 level.

Next Seminar Location
With the Vegas seminar almost sold out, it's time to start thinking about a summer CPTI seminar. I'm looking at the middle to end of July as a time frame. Interest has been expressed in Boston and Minneapolis. Let me know which location you would prefer and/or another preference.

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ONLY 4 SPOTS LEFT FOR LAS VEGAS CPTI SEMINAR
There are only four spots remaining. Las Vegas will likely sell out soon. Don't be left out. Reserve your spot for the Las Vegas June 2nd & 3rd seminar today!

Join the family of over 300 traders who have attended my two-day advanced seminars and left with the knowledge and skills that can make the difference between occasional success and consistent success. Sorry, there are no more retake spots remaining for the Las Vegas seminar.

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CURRENT APRIL CPTI PORTFOLIO POSITIONS
CPTI April Position #1 - RUT - Iron Condor - 819.38
We sold 20 April RUT 720 puts and bought 20 April RUT 710 puts for a credit of $.45 ($900). Then, we sold 20 April RUT 870 calls and bought 20 April 880 calls for a credit of $.50 ($1,000). Our potential profit is $1,900. Maintenance is $20,000 - IF you have the right broker.

CPTI April Position #2 - OEX - Bull Put Spread - 665.35

We sold 20 April OEX 630 puts and bought 20 April OEX 620 puts for a credit of $.45 ($900). Our potential profit is $900. Maintenance is $20,000.

CPTI April Position #3 - MID - Iron Condor - 868.11

We sold 20 April MID 800 puts and bought 20 April MID 790 puts for a credit of $.55 ($1,100). Then, we sold 20 April MID 900 calls and bought 20 April MID 910 calls and were filled at $.65 ($1,300). Our maximum profit range is 800 to 900. Maintenance is $20,000. Our potential profit is now $2,400.

CPTI April Position #4 - SPX - Iron Condor - 1452.85

We sold 12 April SPX 1315 puts and bought 12 April SPX 1300 puts for a credit of $.65. Then we sold 12 April SPX 1470 calls and bought 12 April SPX 1485 calls for a credit of $.65. Our net credit and profit potential is $1.30 ($1,560). Our total maintenance is $18,000.

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CURRENT MAY CPTI PORTFOLIO POSITIONS
CPTI May Position #1 - SPX - Iron Condor - 1452.85

On 3/28, with the SPX at about 1419, we sold 12 May SPX 1300 puts and bought 12 May SPX 1285 puts for a credit of $.70. Then we sold 12 May SPX 1505 calls and bought 12 May SPX 1520 calls for a credit of $.70. Our net credit and profit potential is $1.40 ($1,680). Our maximum profit range is 1300 to 1505. Our total maintenance is $18,000.

CPTI May Position #2 - RUT - Iron Condor - 819.38

We sold 20 May RUT 710 puts and bought 20 May RUT 700 puts for a credit of $.45 ($900). Then, we sold 20 May RUT 870 calls and bought 20 May 880 calls for a credit of $.60 ($1,200). Our potential profit is $2,100. Maintenance is $20,000.

CPTI May Position #3 - OEX - Bull Put Spread - 665.35

We sold 20 May OEX 615 puts and bought 20 May OEX 605 puts for a credit of $.45 ($900). Our potential profit is $900. Maintenance is $20,000.

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ONGOING STRATEGY - THE ZERO-PLUS Strategy
In the past, I outlined a strategy based on an initial investment of $100,000. At that time, $74,000 was spent on zero coupon bonds maturing in about seven years at a value of $100,000. The principal $100,000 investment is guaranteed. We're trading the remaining $26,000 to generate a "risk free" return on the original investment. We are not compounding our profits by dramatically increasing the number of contracts we trade. We have now generated $52,425 ($51,050 $1,375).

NEW ZERO PLUS POSITION - SPX Iron Condor - 1452.85

We sold 12 April SPX 1315 puts and bought 12 April SPX 1300 puts for a credit of $.65. Then se sold 18 April SPX 1470 calls and bought 18 April SPX 1485 calls for a credit of $.65. Our net credit and profit potential is $1.30 ($2,340). Our total maintenance is $27,000.

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CPTI SEMINAR SCHEDULE!
Las Vegas, NV - June 2 & 3

Washington, DC - April 21 & 22 - SOLD OUT!!

Take your trading from a "hobby" to a potentially profitable "business." You need the information you'll learn at my CPTI seminar. You'll learn more than the "how to's" of trading our strategies. You'll learn a new lifestyle - one that can last a lifetime.

DO YOU HAVE PROFIT-ABILITY?
It's always a challenge (and a pleasure) for me to have a roomful of bright people who have a passion for, and are excited about, learning. We go over everything imaginable - from the non-directional strategies to the psychology of trading. We cover a lot more than the mechanics. Inquiring minds want to know the whens and the whys -- not just the hows. That way, they're prepared for the best (and the worst) - and know the best way to handle either situation. Contact me and I'll personally call you with all the details.

If you're a SERIOUS options trader, you want to learn the nuances of our advanced non-directional trading strategies and hone your trading skills. Contact me ASAP at mparnos@optioninvestor.com. Send me your phone number. I'll call you with all the pertinent information. The price is a bargain - ONLY $995.00 -- less than the profit from one Iron Condor trade. You'll have a two-day experience that you'll remember, and profit from, for a lifetime. I limit our CPTI seminars to ONLY 25 ATTENDEES. And, as a bonus, if you attend one of my CPTI seminars, you are entitled to RETAKE the seminar a SECOND TIME at NO CHARGE!

49 OUT OF 52 PROFITABLE MONTHS!!
WANT TO ACHIEVE SUCCESS WITHOUT STRESS?
OF COURSE YOU DO!!
USE OUR CPTI WEALTH-BUILDING TECHNIQUES!

You should definitely attend one of my seminars. With what you learn, you'll see a substantial increase in your trading results. Contact me at: mparnos@optioninvestor.com. If you've already signed up, I'll see you there. If you haven't signed up, what are you waiting for?

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HAPPY TRADING!
Remember the CPTI credo: Our remote batteries and self-discipline should last forever, but mierde happens. Be prepared! In trading, as in life, it's not the cards we're dealt. It's how we play them.
MIKE PARNOS, Your Options Therapist and CPTI Master Strategist

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Couch Potato Trading Institute Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices (though many often do) or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, guess what. It isn't the fault of the strategies.

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