Trying to Stay in Front of this Rising Market

Just a quick update on my trades so far this month.

My NDX Iron Butterfly hit its profit target only 3 days into the trade!  On 2011-03-18 I bought it back for 85.40, leaving me with a profit of 8.50 on a margin of 56.10, or 15.2%.

My other two positions have not fared as well. The SPX shot up from around 1281 when I opened the trade to around 1314 ten days later.  Once my expiration break-even point was hit, the first adjustment was to open another calendar near the money, to give me more credit and protect me from more upside risk:

• On 2011-03-25, bought the SPX April/May 1325 Call Calendar for 13.00.  This increased my debit from 12.60 to 25.60.

Likewise, my RUT Iron Condor was suffering because the index went up from around 788 to 824 ten days later.  I knew it was time to adjust because my short call delta went up from about .16 to about .26, and then again to .36 on the same day!  This required something drastic, so I repositioned the entire condor:

• On 2011-03-25, bought back the RUT April 700/710/845/855 Iron Condor, and replaced it by selling a RUT April 765/775/865/875 Iron Condor.  The new credit was 1.375.

Since then, both the SPX and the RUT have continued to rally, and I needed to adjust both trades again.  First I took off the lower strike SPX calendar:

• On 2011-04-01, sold back the SPX April/May 1285 Call Calendar at 9.95 for a loss.  

This raised my remaining SPX position's (the 1325 Call Calendar) break-even to around 1345.  I can still make my profit target of 20%, even counting the loss on the 1285 calendar, if SPX remains relatively stable or goes down a bit.

• On 2011-04-01, bought back the RUT April 765/775/865/875 Iron Condor, and replaced it by selling a RUT April 800/810/880/890 Iron Condor.  I also increased the size of the position by 50% to get a bigger overall dollar credit.  The new credit is now 0.90333 per share.

I can still make 10% on the trade if the RUT stays between 810 and 880 at expiration.

Happy trading!

Plan Update

Hello followers!

A lot has happened since my last post.  I've won a few and lost a few (trades, that is).  I've started using twitter regularly (you can follow me @potentcocktail), and quit my traditional jobs (at ThoughtWorks and Amazon.com) to trade full time.  I've also realized that in order to make money consistently and with less stress, I need a plan to follow.  Sheridan Options Mentoring is helping me create and follow that plan.

I've signed up as a student, but my mentorship doesn't officially start until April.  In the meantime, I've been watching lots of webinars, and have been trading a little based on them.  I've learned the basics of several strategies, including the Iron Condor, Calendar Spread, Double Diagonal, and Iron Butterfly.  Last month I was very successful with the following trades:

• On 2011-02-14, sold the RUT March 760/770/865/875 Iron Condor for 2.35 credit.  I was looking to make a 15% profit on my margin of 7.47 (about 1.12 per share), and lose no more than 15%.
• On 2011-02-15, bought the SPX March/April 1325 Call Calendar for 9.30 debit.  For this trade my profit target was 20% of my debit of 9.30 (about 1.86 per share), and lose no more than 25%.
• I ended up making a adjustment to roll down the put spread on the Iron Condor to the 750/760 strikes on 2011-02-24.  This decreased my credit to 2.08, and upped my margin to 7.92 per share.  I adjusted my profit target to 15% of this, or about 1.19 per share.
• On 2011-02-22 my Calendar hit its profit target, and I sold it back for 11.20, leaving me with a profit of 1.90.
• On 2011-03-09 my profit target on the Iron Condor was reached, and I bought it back for 0.89, leaving me with my 1.19 profit.

This month, I added an Iron Butterfly into the mix:

• On 2011-03-15, bought the SPX April/May 1285 Call Calendar for 12.60 debit.  Profit target of 20%, max loss of 25%.
• On 2011-03-15, also sold the RUT April 700/710/845/855 Iron Condor for 2.59 credit. Profit target of 15%, max loss of 15%.
• On 2011-03-15, also sold the NDX April 2100/2250/2400 Iron Butterfly for 93.90 credit.  Profit target of 15%, max loss of 20%.

I'll be posting updates as I manage these three trades this month.  Happy trading!