Monthly IWM Iron Condor for January
Looking ahead to the January cycle for a monthly position, I have begun to look at a January IWM Iron Condor. Monday is 39 days to expiration; however the position can be entered any day next week.
IWM closed Friday at 112.48, +.87 (+.78%). The guidelines call for the short strike to be at a delta of .15 - .20. Based on the closing price price, the current strikes recommended would be:
Calls: -118/+123 - Current delta of the 118 Call is .15.
Puts: -105/+100 - Current delta of the 105 Put is -.17
This example is shown in the graph below:
IWM January Iron Condor example:
The current credit for this sample position is only $.74. The minimum credit recommended for this trade entry is $.80, so I would not enter this position until there was sufficient credit. The illustration is just an example for planning purposes. Some traders may choose to be more aggressive and sell spreads with a higher delta on the short for more credit. However, being the more conservative trader I am, I will go as wide as possible as long as I can still get the minimum recommended credit of .80, and look for the lower end of the recommended delta-range.
Depending on the entry day and time, the deltas and short strikes may be different than outlined above.
The target gain on the monthly Iron Condor is 10% of actual margin/risk, and the maximum loss is 15%.
For those of you who may not be familiar with the trade setup and management, the guidelines were published on September 10, and can be found here: Link to Articles
I will post exact entry details when the position is entered.
In closing, I want to summarize yesterday's move for those that trade/follow the SPX weekly credit spreads. SPX closed yesterday at 1805.09, up over 20 points. The one-day standard deviation as calculated yesterday is 14 points; and SPX never pulled back long enough to be within the guidelines for trade entry. The reasoning behind this guideline is that quite often we see a retracement the day following a big gap. Although it could be small; I feel that when we are trading directional put credit spreads and there is this much of a move, it is not worth the risk to put the position in jeopardy if there is even a slight pullback Monday. This is especially the case with weekly trades, with very little time to recover.
The plan is to enter a new position for the December 3 weekly cycle next Thursday, as long as market conditions are within the guidelines.
As always, trade carefully and stay keen on your risk management.