New Trade Entry: RUT Weekly Call Credit Spread for the June cycle, which expires June 22.
We had planned to enter a credit spread on Thursday, but both SPX and RUT moved over a one-day standard deviation, out of the guidelines for trade entry. This morning, RUT was below the 20 day moving average of 986.80, so we entered a call credit spread rather than a put spread. Below is the position entered earlier today:
RUT Position Entered Friday, June 14. The Option code for this cycle is: RUTW130622.
RUT June Call Credit Spread as of the close Friday
Time of entry: 11:00 am Eastern. RUT price: 985.38 at entry; RVX at 21.07
SOLD June 1010 Call. Delta -.13 at time of entry
BOUGHT June 1020 Call
Credit received: $.95
Maximum margin/risk is $905. Maximum risk is the width of the spread ($1,000 less credit received $95).
Target Gain: $71.25 (75% of credit received). This gain represents a 7.9% gain on actual margin.
Maximum Loss: $95
I recommend that a "good to cancel" order be entered to close the position for either target gain or max loss. This can be done using an OCO (one-cancels-other) order on most broker's platforms. Each broker is a bit different; I suggest that you contact your broker for the proper setup of the OCO. Having this in place removes the emotions that can sometimes cloud a trader's judgement, and reduces the amount of time needed to be at your computer monitoring the position.
For this position, to close the spread for .20 would be target gain ($75 before commissions). If the cost to close the spread reaches 1.90, that would be the max loss (-$95 before commissions).
For those unfamiliar with this trade, the guidelines were published on May 12, 2013. The article can be found here: Link to Articles
The original guidelines call for a Tuesday entry, however, with the volatility at this level, there is usually sufficient credit to enter any day up until Friday.
I will post an update as the trade progresses.
Update on Open SPX Iron Condor (Test Kitchen) Positon:
Below is the position as of the close Friday:
SPX Iron Condor :
This week's position is progressing very nicely; it is currently +$150, or 5.6%% of margin. Our target gain on the position remains at $204.
One noteworthy item is that the FOMC meeting is next Tuesday and Wednesday, concluding with Chairman Bernanke's press conference at 2 pm Est. on Wednesday. This can often be a market-moving event, and we will likely exit both open positions prior to the press conference, even if they are not at full target gain. The last day to trade both RUT and SPX next week is Thursday, as this is the regular monthly cycle.
As always, stay keen on your risk management and trade carefully.