RSS FEED

Do you know any trading coaches who publish the results of their trades daily? Dr. Duke posts the trading track records of his Flying With The Condor™, Conservative Income, Dr. Duke's Trading Group, and The No Hype Zone Newsletter services in the free downloads section of this web site. If you have questions about any of the trades, Ask Dr. Duke.

Dr. Duke practices what he preaches! You are entering the "No Hype Zone"!

 

The RUT gapped up at the open today and I closed the 560/570 call spreads on our July condor for $0.45, for a gain of $2,800. At the close, we could have closed our 460/470 put spreads for a small net profit on the condor. I will watch the market carefully and close these put spreads if the RUT drops further. I will consider adding a calendar at the short $470 strike as a hedge to allow us to hold this position longer.

The position delta on our 450/480 530/560 iron butterfly has risen to $41 but our theta has risen slightly to $111, with the ratio still over 2:1. We will continue to hold this position.

Today the markets dropped significantly with the RUT dropping nearly $20 to close at $492.81. Our July condors at 460/470 and 560/570 (See June 12 for details) now have a position delta = $91. Since theta = $105, this is getting a little out of our sweet spot. I will be looking to close the call spreads early tomorrow and will then watch the put spreads closely for an exit opportunity. When you close one side of a condor, you are now exposed if the market continues to move against you, so be very cautious. At today's close, I could still close the puts for less than double the intiial credit, so it isn't out of hand yet.

The iron butterfly we initiated Friday is in an excellent position; the position delta moved from a negative 55 to a positive 21, so we are now even more delta neutral than on Friday. Our theta here is over $105, so this is a much better theta/delta ratio. We will continue to hold this position.

If the S&P futures are looking strong tomorrow morning, I will look to close my call spreads on the condor and possibly even the butterfly in the first few minutes of the market.

At the time of this writing, the CBOE has not yet posted the settlement value for RUT (the Russell 2000 Index). However, RUT ranged form $510 to nearly $518 today, so we can be assured our iron condor spreads at 410/420 and 570/580 will expire worthless tomorrow. So our June iron condor was closed at a $4,600 gain on $15,600 of capital at risk for a 29% return. Now, this return is a bit on the high side because we initiated 380/390 put spreads and rolled those up to 410/420; so this augmented the returns a bit as did the fortunate circumstances that allowed us to carry the position into expiration, adding to the gains. See my blog from June 6 for the details of this position and its history.

Our July iron condor is in good shape, with a position delta of -17 (see my blog from Friday, June 12 for the details of this position).

I also initiated an iron butterfly today on RUT, with 5 contracts of the 450/480 put spreads for a credit of $4.35 and 5 contracts of the 530/560 call spreads for a credit of $7.10. I positioned this toward the downside because I am feeling bearish about this market; my position delta is a negative 55. If I am wrong, I will either be adjusting or closing the call side very quickly. You can "lean" your condors and butterflies one way or the other; but be aware that you are reducing your safety margin on one side of the trade and must be prepared to adjust or close quickly. Don't get into an "I'm sure I'm right" game with yourself and get in trouble if it moves against you.

The Russell 2000 Index (RUT) closed at $507 today. This is near perfect positioning for our June iron condor with spreads at 410/420 and 570/580. Each of the short strikes are over seven standard deviations away from the current index. Barring a $30 to $40 move in the RUT tomorrow, we will allow these spreads to expire worthless. This saves us about $300 in remaining time value and commissions on this position. However, that is not sufficient savings to incur much risk at all. Which is why we would often have closed our condors before now. But we now only have one full day of trading and Friday morning's opening left in front of us and yet we have several standard deviations of safety margin. Hence, the rule: if we have less than two standard deviations of safety margin on either spread on the Friday before expiration, close the spreads on that side.

Our July iron condor on RUT at 460/470 and 560/570 is in good shape, with a position delta of 11. We want to keep our position delta low because this is a measure of how much gain or loss our position will incur with each dollar move in RUT. Position delta helps us monitor and quantify the risk of our position due to price movement in the underlying index.

The RUT closed at $503.74 today, another down day. This has served to position our June condor at 410/420 and 560/570 almost perfectly for expiration with the calls over four standard deviations OTM and the puts over six standard deviations OTM. We will continue to watch this position, but it is extremely likely that we will allow these spreads to expire worthless.

Our July condor at 460/470 and 560/570 stands at approximately + $150. Our put spreads are underwater, but still within our adjustment window. Our calls are making money, but still not at the levels where we would take them off (see my comments from 6/12 for our closing criteria for this position).

The key here is to play what the market gives you rather than trying to predict the market's next move.

The RUT (Russell 2000 Index) closed down at $511.83 today. Our RUT Jun iron condor at 410/420 and 560/570 is in a very good position. Normally, we would be inclined to have closed this trade either last Friday or today. However, I allow the spreads to expire worthless and save the last few hundred dollars of time value and commissions if, and only if, the spreads are > two standard deviations away from the index. Today, the calls stand at over 3 and the puts at over 6 standard deviations out of the money (OTM). We will monitor them carefully until the last hour of trading on Thursday. As long as both spreads are > two standard deviations away, we will allow them to remain open into expiration.

Our July RUT iron condor at 460/470 and 560/570 stands at slightly positive to breakeven at the close today, so we will continue to hold this position.

Our June iron condor at 410/420 and 560/570 on the RUT (Russell 2000 index) is in good shape; today's slight bearish move strengthened its position. Our $570 strikes are now > 2 standard deviations out of the money (OTM).

We also established an iron condor in July today on RUT at 460/470 for $1.45 and 560/570 for $1.85. It is a 20 contract position, so the total credit is $6,600 and the capital at risk is $13,400. The risk/reward ratio of this condor is much smaller than the one above, closer to 2:1. This is a somewhat tighter position, with each spread inside of one standard deviation. We will target to only be in this position for about two weeks. Our breakevens are at $467 and $563, but we will close the trade well before reaching those points. We will close the spreads on a side when the debit to close either is twice the original credit or when we can close the spread for less than half the original credit.

The RUT index closed today at $526.08 with IV = $33.43%. With 7 days remaining to June expiration, one standard deviation = $24. Therefore, our $570 calls are 1.8 std. dev. from the current index price and the $420 puts are 4.4 std. dev. away. Since our last blog on Tuesday, the markets have basically traded sideways. Our condor is in excellent position, with nearly two standard deviations of safety margin on the call side and over four standard deviations on the put side. I like this position because my fear continues to be for another downside drop in the market (I just don't see any encouraging economic news) and we have plenty of room on that side. My normal rules for closing my condors are to close on either the Friday or the Monday before expiration if the short strikes are within two standard deviations of the index. In a case like this one, I will watch the call spreads closely; given that we are at 1.8 standard deviations today, I probably won't consider closing these until Monday at the earliest. If you are more conservative, I recommend you simply close on the Friday before expiration (tomorrow). I use the two standard deviation rule because I hate to give away those last few hundred dollars in time value and commissions and I think this is a reasonable level of safety margin. But expiration week can be very volatile, so watch your positions very carefully if you choose to take them into next week.

A few minutes before the market closed today, the RUT index stood at $529.61 and IV = $34.92%. Based on 9 days to June expiration, one standard deviation = $28. Therefore, our $570 calls are 1.4 std. dev. from the current index price and the $420 puts are 3.8 std. dev. away. Bottom line: our condor is in good shape. As time marches on, that $570 short strike is becoming more and more unattainable. Stay tuned.

Now that we have closed our iron butterfly, let's check on an iron condor on RUT we started on May 1 with June options and 48 days to expiration. We sold 20 contracts of the 380/390 put spread for $0.90 and the 570/580 call spread for $1.05, for a total credit of $3,900. By May 8, the RUT had traded upward strongly, so we closed our 380/390 puts for $0.55 (net profit of $700), waited a couple of days and sold the 410/420 put spread for $0.90 on May 11. On May 18 I added two calendars to boost the theta for this position and reduce the negative vega typical of condors: 10 contracts of the Jun/Jul 480 put calendar at $8.55 and 10 contracts of the 500 call calendar at $7.95. However, IV has been gradually falling and this hurts our calendars, so I closed the call calendars on May 28 for $8.40, a gain of $450, and closed the put calendars on June 3 for $8.30 for a $250 loss. So as of today, this position stands well inside positive territory and our theta decay is just under $200/day. However, if the RUT continues its upward climb, we will close the call spreads early. The delta of the 570 calls is 12 this morning. We won't allow that to exceed 18.