Pictures are worth 1,000 wordsâ€¦.It goes without saying from looking at the IWM 6 month chart pictured below that the bears have had full control of the market the last few days.
IWM 6 month Chart
IWM closed yesterday at 111.79. The open February Iron Condor position is hovering at the downside adjustment point. The current position is pictured below:
IWM February Iron Condor as of January 27
The position is currently at breakeven, even with the increase in volatility. The adjustment plan is to roll down the put spreads if IWM closes at 111, 2 points before the short strike. The adjustment planned will be to roll the put spreads down 3 points, with the goal to place the new short put at a delta less than -.20. At this time the 106 short put has a delta of -.18, but this will most likely change when the market opens.
As of this writing, futures are trading up from the close yesterday, so I will not adjust the position until very late in the day or tomorrow, waiting to see if IWM closes before the adjustment trigger.
Once the position is adjusted, it is a traderâ€™s choice whether to increase the size of the position to achieve the same target gain, or to keep the original position size and accept a lower target.
Having said that, it is a traderâ€™s individual decision whether to wait for target gain, or max loss, on any position . Trading is a blend of oneâ€™s individual style, risk tolerance, and intuition. This combination can help reach your annual trade plan results. I recommend following your own trade style; there is nothing wrong with exiting a position early. Particularly in this volatile environment, capital preservation is the most important element of my own trade plan. Remember, trading is an art, not a science.
A trade update will be posted as appropriate.
Tomorrow afternoon at 2 pm brings the conclusion of the FOMC meeting, and the announcement regarding QE tapering plans. This announcement could bring some volatility to the day, so it is recommended to be very vigilant and act accordingly with any potential move. Since this position is a monthly rather than a weekly position, it is possible that we can ride out the news without having to adjust the position.
Regarding the SPX weekly credit spread; as of now I am planning to enter a position this Thursday for the February 1 cycleâ€¦.depending, of course, on market conditions.
As always, stay keen on your risk management and trade carefully.