Weekly Iron Condor Trade #1 (Part 1)
Posted by Mark on July 7, 2015 at 05:53 | Last modified: July 2, 2015 10:00On June 3, 2015, I did my first weekly iron condor (IC) trade. The idea is to sell the 4-legged beast with 8-10 days to expiration around a 0.05 delta. I want to collect $0.40 per vertical spread.
My primary exit is to let the trade expire.
The only adjustment on this position is to close the distressed 15-point vertical if its premium reaches two times the credit generated by the whole trade. If I collect $0.40 per vertical spread then I will close either side if it reaches $1.60.
In theory, this is a high probability trade. If I sell a 0.07 (aggressive approximation) delta then the probability of touching is 28%. For calculation purposes, I will consider “touching” to be a loss but in reality I think the chance of losing is greater since I don’t believe touching is required to hit max loss. To account for that, I will consider a loss to be two times the average win.
Based on these assumptions, expectancy would be:
(0.80 * 0.72) + (-1.60 * 0.28) = 0.128
Since there is overlap of two trades on Wednesday through Friday, the weekly ROI is 0.417% on 30 points gross margin. This is 22.19% annualized.
If I were always able to close the losing vertical spread for 2x then my theoretical loss on the trade would only be $0.80 instead of $1.60. This would double the projected annualized return. I am taking a wait-and-see approach until I see how often it actually loses.
I will set a contingent limit order to close when a vertical spread reaches $1.60.
Given this trading plan, on June 3, 2015, I placed a JunWk2 2180/2165/2035/2020 IC for $0.85 credit.
At 9:35 on June 5, my contingent order to close the put spread fired. I called the trade desk and contested this trade because from what I could see, the spread was nowhere near the trigger price. I requested the time and sales report to verify. They could not get me this by EOD (customer service rep said the quotes provider “blew him off” despite repeated requests to get the information) so he told me to resell the spread. I did this after market close and the brokerage reimbursed me the difference.
Weekly IC trade #1 lived on…
Categories: Accountability | Comments (1) | PermalinkRUT Weekly Calendar Trade #10
Posted by Mark on July 2, 2015 at 06:28 | Last modified: July 2, 2015 08:51I opened my tenth weekly calendar trade Tuesday, June 16, at the 1260 strike. The market was 1261.61 at the time of fill. I placed the order at the mid and caved $0.10 over 16 minutes to get filled $0.15 off the then mark.
Two days later with the market just over 1280, I rolled one of the 1260 put calendars to a 1285 call calendar for a $0.20 debit. Later that day with the market at 1285, I rolled the other 1260 calendar to 1285 for a $0.65 debit. This would be my last adjustment for the position, which was now down 12%.
In two days, I had basically closed the initial trade and reopened another 25 points higher. For this trade to turn out well, the market pretty much had to stay calm for days.
On Tuesday, June 23, the position was down 3% and just a couple points away from the upper expiration breakeven. To have a chance at a profitable outcome, I figured I would have to hold into the last two days. As I have done previously in this case, I closed one of the calendars to decrease risk in case Wednesday were to welcome me with a big gap opening.
The market traded lower on Wednesday and my contingent order to close was triggered at 1:32 PM with the market at 1285. This position made about 10% in nine days.
Categories: Accountability | Comments (0) | PermalinkInvesting Meetup Report (Part 5)
Posted by Mark on July 1, 2015 at 07:58 | Last modified: July 2, 2015 08:26I’ll complete this review of the Meetup from three weeks ago by discussing a couple other attendees.
One attendee was a real estate investor who stated his reason for attending was to learn more for diversification purposes. The implication was clearly that he does well with real estate and has money to invest elsewhere. Also supporting my inference is the fact that he passed his business card out to everyone present. As we were leaving, he engaged me in conversation by asking if I or anyone I know might be interested in real estate. I said “not at this time.” He quickly dismissed me soon after saying his wife had texted telling him to come home for dinner.
Speaking of ulterior motives, this is something I have also commonly seen at Meetups: people in unrelated fields looking to market their wares. Was this guy really looking to learn about stock investing to put his real estate profits to work? Maybe. I think it’s also likely he was looking to advertise his real estate experience of buying and flipping houses to a group of people eager to make money. We’re attending a stock investing meetup because we want to make money, he figures. Why not try and make money through real estate and give him our cut instead?
The last person I want to discuss is another financial advisor in attendance. He was not with the company organizing the Meetup. With conflict of interest in mind (how could it not be?), I wonder why he chose to attend. He said he loves learning about investing and finance as a whole. I then asked the pointed question: what was he hoping to learn that he, being in the business himself, did not already know? I wonder if he was just checking out his competition (other advisors) or if he was looking to network and possibly find new clients himself? I’ll found out more as time goes by.
This Meetup was typical of others I have attended: arrogance, sales, marketing, ignorance, and a lack of useful connections. At least it was an excuse to get out for the night.
Free food, too… who can forget about that?!
Categories: Networking | Comments (0) | Permalink