121001 Weeklys Trade

October 1

8:34 am; RUT = 841

Traded 10-lots; Credit $1.10.

Difficult to find a good delta neutral play. Chose the following:

RUT 815/820P; 855/860C

Delta when trade was made: 13(P); 18(C)
RVX = 19.88


This is not a good trade. I notice that the put spread was sold for only 24 cents. It’s true that I cannot know what the fill prices will be when I enter an order, and it is also true that I should not care about the prices of the individual trades (and only care about the total cash received). However, at that low price, there is no real reason to sell the spread when the offsetting side is 86 cents.

A better trade would have been to sell the 855/860 call spread instead – or even better, I could have chosen the 820/825 put spread. In my defense, the market did rally by a point or two just after I entered the order.

9:10 am; RUT = 846.42

The rally, coupled with my unfortunate decision to select options that left me a bit short, is of concern.

I entered an order to roll up the put spread. I’m offering to sell the 815/820; 825/830 put condor for a 40-cent premium. I won’t leave this order in too long becasue that 40 cents in extra premium is not likely to be sufficient to offset future upside risk. One alternative trade
is to roll down the call spread by five points. Thew ask for that roll is $1.10 – and I don;t know where it could be bought. But even 50 cents feels too high right now.

9:33 am

Put adjustment cancelled

12:24pm; RUT = 836.99

With RUT back to the negative side, we can all see the risks associated with so much negative gamma. Currently, the puts are more of a threat than the calls (Delta 18 vs. 12).

After the close

Thursday I’ll be at the Money Show (I speak at 10:45 and again at 4PM), so will be gone all day.
That makes it important to exit this trade Wednesday.

Oct 2

9:24 am. RUT = 840.30

Initial rally fades.
Short options delta: 12 and 12.

No action necessary.

1:01 pm. RUT = 838.98. Short delta: 11 and 10.

One lot is offered at 63 cents. I enter a bid to exit the whole iron condor: 40 cents.

2:59 pm RUT = 840.51

Nothing done today.

Oct 3

8:34 am; RUT = 841.64; Short delta: 8 and 11

I’m bidding 35 cents to exit. In this very calm market, that feels like it is a bit too much. However, I will not be able to do much if anything tomorrow, so for safety, I want to exit today.

9:12 am; RUT = 836.60

Paid 10 cents for calls.
Bidding 25 cents for puts

9:17; RUT = 839.07

Dropped bid and was filled at 20 cents on puts.

Cost to exit: 30 cents; profit 80 cents.

View track record here.

4 Responses to “121001 Weeklys Trade”

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