14 Mar 2007

Close Trade Recommendation for RUT (Russell 2000) Iron Condor initiated on 1 Feb 07

Trade Summary

RUT at 776.47
0 days to Mar expiration.

Buy RUT Mar 850 Call
Sell RUT Mar 860 Call
Buy RUT Mar 740 Put
Sell RUT Mar 730 Put

For a net price of $0.15 Debit or less.
Profit or Loss: +$60
Percentage Profit: 60/770 X 100% = 7.79%.

Trade Analysis

At one point, this trade was a loser. But we decided to fight on and entered another short put spread to collect some more premium. As it turned out, we could have collected more for that Mar 740/730 put spread. At one point it was trading at $1.65 credit. Well, if only we knew isn't it. Heck, if only we knew what was going to happen, we wouldn't have rolled our put spread. We were originally short Mar 760 put and long 750 put. When RUT slided to less than 20 points away from our short put, we kicked in our defensive plans. We closed the put spread and sold another one at a lower strike.

We initiated this trade on 1 Feb for a $2.30 credit. We closed our short put spread on 5 Mar for $2.75 debit. On the same day, we sold another put spread at lower strike for $1.20 credit. And finally we closed the entire trade today for $0.15. $2.30 - $2.75 + $1.20 - $0.15 = $0.60. We made a profit of $60 per trade for this recommendation. Not as much as we like of course. But taking into consideration of what happened to the market recently, it's a small but sweet profit! Fact is we made a profit when millions of dollars were wiped off.

Nice condor!

Gary

5 Mar 2007

Initiated Put Spread for RUT (Russell 2000) Iron Condor initiated on 1 Feb 07

Trade Summary

RUT at 769.84
10 days to Mar expiration.

Sell RUT Mar 740 Put
Buy RUT Mar 730 Put

For a net price of $1.20 Credit or more.
Total margin required: -.

Trade Analysis

As mentioned earlier, we were stalking a put spread to short and we found one that offers us a buffer distance of another 26+ points and 2 very important resistance points. The first resistance is 78.6% Finbonacci retracement (from the low of 745 on 2 Nov 06 to the high of 830 on 22 Feb 07)at 764 level. The second resistance is the 200 days-MA at 746 level. We will watch this position very closely. Specifically, we will watch for a close below 760 level. We should be prepared to close this spread when it hits below 755, which is only 15 points away from our short 740 put. With only 10 days to expiration and a quick bounce looming, we believe this spread is worth the risk. We'll want to close this spread during a bounce in the next few trading sessions.

Gary

**********Trade History**********

5 Mar 2007

Close Put Spread for RUT Iron Condor initiated on 1 Feb 07

Trade Summary

RUT at 771.61
10 days to Mar expiration.

Buy RUT Mar 760 Put
Sell RUT Mar 750 Put

For a net price of $2.75 Debit or less.
Total margin required: -.

Trade Analysis

As the RUT slides closer to our short put of 760 (at one point it was trading at 11 points away from our short put), we decided that it is best to close up our short put spread now, even if it was for a small loss. We have experienced before how fast and how difficult to get filled when the market decides to tank.

Last Friday was a case in point. We entered the order to close up this same put spread for $2.00 when RUT was trading at around 780+ but we couldn't get filled. It lost about 15 points on Friday and we were not filled even though we raise the price along the way. Closing it now will prevent the same scenario from happening again. And with RUT only 11 points away, it might be too late to do anything if RUT decides to tank another 10+ points today. Another 10 points move downward will almost guarantee a loss in this IC. So to minimize our loss, we have to close this put spread today.

However, all is not lost in this IC. We can still sell another put spread at lower strikes to collect some premium. With only about 10 days to expiration and VIX at near-20, we should be able to get pretty decent credits for a put spread. Furthermore, the market has been very beaten for the whole week and a bounce is inevitable soon. We are currently stalking some potential spreads to sell. We want to be very careful in this volatile market. A move of more than 10 points is now not that rare anymore.

Good trading,

Gary

*****Trade History*****

1 Feb 2007

RUT Iron Condor initiated on 1 Feb 07

Trade Summary

RUT at 807.23
41 days to Mar expiration.

Sell RUT Mar 850 Call
Buy RUT Mar 860 Call
Sell RUT Mar 760 Put
Buy RUT Mar 750 Put

For a net price of $2.30 Credit or better.
Total margin required: $770.

Trade Analysis

I apologise for sending this email alert so late. We just managed to get it filled and we fired out our emails as soon as we get filled.

This iron condor is a little too early, with 41 days to expiration. But if we were to wait till next week, we most probably will not be able to get the price of $2.30. Considering that we are heading to the weekend soon, 41 days don't sound that far after all.

As you can see from the chart, the probability of success of this trade stands at 70.50%. Although this condor is slightly negative in delta, we believe we have a good chance of making a profit with this trade.

I'm sorry I can't go on typing because I wish to send this out before the market closes. Some of you who may only read this alert after the market closes. If so, you can try to enter this trade tomorrow if and only if you can get the same price of $2.30 or better. $2.25 is still acceptable. Anything less than $2.25 is a no-go.

Gary

Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com

Please note: All MarketNeutralOptions Advisory emails are price sensitive. Therefore, all recommendations, unless otherwise noted, are applicable for 'DAY' orders only, not good-till-cancelled. If a recommendation cannot be filled, we may choose to resend the email the following day along with any modifications.
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