New Trade Entry : SPX Weekly Credit Spread and Iron Condor for July 4 cycle. Below are the positions entered earlier today:
1) SPX Credit Spread Position Entered Thursday, July 18, 7 days prior to expiration. The Option Code for this cycle is SPXW130726, expiring Friday, July 26.
The 20 day Moving Average was at 1633.62 at the time of entry, with SPX at 1691.38. Because the price of SPX was above the Moving Average, a Put Credit Spread was entered.
SPX Jul 4 Credit Spread shortly after entry
Time of entry: 11:25 am Eastern. SPX price: 1,691.38 at entry; VIX at 13.57
SOLD July 4 1655 Put. Delta -.13 at time of entry
BOUGHT July 4 1645 Put
Credit received: $.80
Maximum margin/risk is $920. Maximum risk is the width of the spread ($1,000 less credit received $80.
Target Gain: $60 (75% of credit received). This gain represents a 6.1% gain on actual margin.
Maximum Loss: $80
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 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, but I have found that sufficient credit is often available for an entry as late as Friday.
2) SPX Iron Condor Position Entered Thursday, July 18, 7 days prior to expiration. The Option Code for this cycle is SPXW130726, expiring Friday, July 26.
SPX Jul 4 Iron Condor position shortly after entry
Time of entry: 11:40 am Eastern. SPX price: 1,692.25
Call Spreads: -1725/+1735. Delta of short call .11 at time of entry
Put Spreads: -1650/+1640. Delta of short put -.11 at the time of entry
Credit received: $1.30
Maximum margin/risk is $870. Maximum risk is the width of the spread ($1,000 less credit received $130.
Target Gain: $97.50 (75% of credit received). This gain represents a 11.2% gain on actual margin. It is recommended to have a GTC limit order in to close either spread for .20
Maximum Loss: $130
Adjustment Trigger: If the delta of the short call or short put reaches entry delta +10 (in this case .21), roll out the threatened side 10 points. As outlined in the guidelines published on July 4, it is a trader's choice after adjusting to either add additional spreads at the new strikes to make up the difference in credit, or to just have a reduced target gain.
I have not yet entered a RUT credit spread; I prefer to diversify trade entry a bit by time and will re-visit entry tomorrow if conditions are within the guidelines.
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully.