The first trading day of the New Year brought some choppiness to the table.
At the open yesterday, it appeared that the bulls were coming back in full force to start 2015 where they left off before the Holiday. However, after reaching the intra-day high of 1212.80 early in the trading day, RUT pulled back sharply to the daily low of 1189.16. The choppiness continued throughout the low-volume trading day, and RUT recovered to close down just below the 1200 level at 1198.79.
The close put the RUT January Iron Condor in a favorable position to close the week, and a summary of the trade and current status is below:
Open Position Status; RUT January Iron Butterfly.
A summary of the monthly RUT position opened Thursday, December 18:
SOLD RUT January 1180 Call.
BOUGHT RUT January 1230 Call.
SOLD RUT January 1180 Put.
BOUGHT January 1130 Put.
Net Credit (all four legs): $35.15.
BOUGHT RUT January 1260 Call. Debit: $1.70
The trade guidelines call for the position to be adjusted with a 10 point move from the center strike in either direction. With RUT at approximately 1193, the position was adjusted on December 19 as follows:
BUY RUT January 1180 Call.
SELL RUT January 1230 Call.
SELL RUT January 1200 Call.
BUY RUT January 1250 Call.
Net Debit (all four legs): $7.95.
After this initial adjustment, the position had short strikes at 1200 and 1180, converting it from an ATM Iron Butterfly to a 20-point wide Iron Condor.
On December 26, the call spreads were rolled another 20 points towards the close of the day. Adjustment order summary is below:
BUY RUT January 1200 Call.
SELL RUT January 1250 Call.
SELL RUT January 1220 Call.
BUY RUT January 1270 Call.
Net Debit (all four legs): $9.75
The adjusted position now has the short call strike at 1220. The short put is at the original strike of 1180, so we now have a 40 point wide Iron Condor, with the additional long call at the 1260 strike purchased at the original trade entry. This long call is helping to keep the T +0 line flat on the upside.
Below is the graph of the adjusted position as of the close Friday:
RUT January Iron Condor:
The position is currently $218 (not $281 as shown on this after-hours snap), very close to target of $250 but I could not get a fill yesterday due to the low volume. However, it is very well centered and totally flat delta, so in a good position to gain some weekend theta.
This position will remain open without further adjustments as long as RUT stays between the short strikes, until target gain is reached. The position will be closed if the max loss is reached. If RUT reaches either short strike, the threatened side will be rolled again, depending on market conditions and position status. At that point, as outlined in the guidelines, it will be most likely necessary to roll up the unthreatened side to get more credit in the trade.
The trade guidelines were most recently published on October 22, and can be found here: Link to Articles
Next week is the first full trading week of 2015; and brings some economic news that could create some volatility starting mid-week. A recap is below:
10:00 am Factory Orders
10:00 am ISM Non Manufacturing Index
8:15 am ADP Employment Report
8:30 am International Trade
10:30 am EIA Petroleum Status Report
2:00 pm FOMC Minutes
8:30 am Jobless Claims
8:30 am Monthly Non Farms Payroll Report
We plan to resume the weekly Iron Condor next week; I wanted to wait until the first full trading week was well underway. Depending on market conditions, we will look at entering this SPX position next Friday after the market settles from the monthly employment situation report.
Position updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,