New Trade Entry: SPX Weekly Put Credit Spread for June 2 cycle, which expires June 14. Below is the position entered this morning:
SPX Position Entered Tuesday, June 4, 10 days prior to expiration. The option code for this cycle is: SPXW130614
SPX June 1 Put Credit Spread shortly after entry
Time of entry: 11:10 am Eastern. SPX price: 1,639.30 at entry; VIX at 16.26
SOLD June 2 1580 Put. Delta -.14 at time of entry. Because there was ample credit in a lower delta, I took advantage of the opportunity to get a bit further away from the underlying price.
BOUGHT June 2 1570 Put
Credit received: $.90
Maximum margin/risk is $910. Maximum risk is the width of the spread ($1,000 less credit received $90).
Target Gain: $67.50 (75% of credit received). This gain represents a 7.4% gain on actual margin. I do want to mention that this Friday, June 7, is the release of the monthly Non Farms Payroll report at 8:30 est., which can often be a market-moving event. I would recommend exiting the position at a lower target before the close on Thursday, the trade can always be re-entered Friday after the news release and the market settles.
Maximum Loss: $90
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 VIX at this level, there is usually sufficient credit to enter any day up until Friday. I do caution, however, of the monthly non farms payroll report coming out Friday morning which I mentioned earlier can move the market significantly. For those of you planning on a Friday entry, it is recommended to wait until after the news release and the market settles before entry.
I will post an update as the trade progresses.
For those of you who may be interesting in adding an ETF trade to your plan, I have begun back testing an Iron Condor on IWM. I will share those back testing results with you when complete, along with the trade guidelines.
As always, stay keen on your risk management and trade carefully.