Today's market certainly answered our questions about consolidation versus correction. The S&P 500 broke through its 50 day moving average, closing at $1043, down over $20 on the day. RUT broke support at $576 and closed at $566, down almost $21 on the day. RUT's break through $576 confirmed the double top pattern we commented on yesterday. Investor's Business Daily (IBD) declared a "market in correction" yesterday and today's action made it abundantly clear to everyone. By the way, I highly recommend IBD's "The Big Picture"; they do an excellent job of tracking the overall market trend.

As the market opened up this morning in negative territory, I closed my Nov 520/530 put spreads for $0.90 (20 contracts). This leaves my Nov iron condor with 20 contracts of the 680/690 calls that are almost three standard deviations OTM. I will monitor them, but most likely will allow them to expire worthless. If that is the case, my Nov iron condor will have gained $2,060 or 13% on capital at risk.

Later in the morning, as the market carnage continued, I bought two contracts of the Jan $510 puts for $12.80 to hedge my Dec 500/510 put spreads. This is somewhat ironic since I just established that condor yesterday. This left my Dec condor at the close with a P/L of zero, delta = -$29 and theta = +$29. These weak Greeks illustrate how vulnerable the iron condor is to early moves against the position.

Allow me to make one other observation about today's activities in the market: as I was looking at my Nov condors this morning when the market opened down, I had a tempting voice in my head trying to convince me to wait and give it some time to turn around - "don't close those put spreads at a loss; maybe we can get out even later today or tomorrow". Later in the day, I was tempted not to buy the hedge for my Dec condor because I had just put that position on yesterday. But my short puts had already crossed delta = 17, so I bought the Jan puts. Develop your system and then follow your rules. It sounds simple, but anything involving our emotions is rarely straightforward.