Trade Entry Plan for November SPY Iron Condor
The guidelines call for entering the monthly SPY Iron Condor approximately 39 days prior to expiration, which would be today. However, given last week's volatility and the low holiday volume, I do not recommend entering this position today. There is plenty of time to let the market settle for a day or two before entering a new monthly trade. If the market is within the parameters of trade entry, I will be recommending opening this position tomorrow (Tuesday).
For those of you who may not have been following the monthly Iron Condor on SPY, a summary of the trade entry is as follows:
- Sell a short strike with a delta in the .15 - .20 range.
- Buy a long strike 5 points away from the short strike.
- Minimum credit (for both sides) should be at least .80, or it is not recommended to enter the position.
- Target gain is 10% of the actual margin/risk. This is calculated by the width of the wings (5 point in this case = $500), less the actual credit received. For a one-contract trade using the minimum credit of $.80, the margin/risk is $420. Target gain in this example is $42.
- Max loss is 15% of the margin, or $63 using this same example.
- This position will be traded as a "no touch"; it will remain open as long as SPY remains between the short strikes, until the garget gain is reached. The position will be exited at either short strike or the pre-set 15% max loss.
As always, stay keen on your risk management and trade carefully,