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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.
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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.
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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.
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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.
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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.
