14 Mar 2007

Close Call Spread for RUT Iron Condor initiated on 12 Feb 07

Trade Summary

RUT at 770.45
0 days to Mar expiration.

Buy RUT Mar 850 Call
Sell RUT Mar 860 Call

For a net price of $0.08 Debit or less.
Profit or Loss: $27 per position.
Percentage Profit: 27/800 X 100% = 3.38%

Trade Analysis

Some of you may be thinking that this trade is rather redundant and I'll agree. You can choose to ignore this recommendation to close the call spread at your own risk. Very low risk at that. For auto-trade subscribers, your position will be closed.

There are two main reasons why we'd want to close this spread. Firstly, it'll free up our margin. We can make better use of the margin to inititate new trades. Secondly, it is to eliminate all risk attached to this trade. It's very true that it's very unlikey RUT will come anywhere near our short call of 850 in the next few days.

That said and done. You may want to consider closing up only the short call to save on commissions and eliminate all risk at the same time. Or you may want to just let it expire worthless in the next few days.

Gary

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

28 Feb 2007

Seems like the market moves a little too fast. It's going to be very difficult to be filled at $1.55. We'll adjust the target price to close this put spread to $1.65.

Close Put Spread for RUT Iron Condor initiated on 12 Feb 07

Trade Summary

RUT at 793.88
14 days to Mar expiration.

Buy RUT Mar 770 Put
Sell RUT Mar 760 Put

For a net price of $1.55 Debit or less.

Trade Analysis

You must be living in a cave if you haven't heard about the market yesterday. So I'm not going to repeat what you should have read in the papers.

Earlier today the market attempts a bounce to recover from yesterday's massive losses. However, do not be fooled into thinking that the sell-off is over. Losing 400 points and then gaining back a 100 is not a recovery. The market is extremely weak and fragile now and thus we must be nimble and alert with our positions. We'll take advantage of this pause in selling to close up our short put spread to lock in a small profit and to reduce our downside risk. Although RUT is trading at about 20+ points away from our short put of 770, we do not take chance with this kind of condor. Our alarm rang yesterday when RUT traded briefly at 790, which was our first line of defense. We'll either roll or close up the short side when our first line of defense is breached. However, we decided to hold our fire and see what happens today. Fortunately, we are given a break in the sell-off to recollect our thought and nerves.

We decided to close this put spread at this moment because we don't know yet if RUT will trade lower than yesterday's low. We may enter another short put spread to collect more premium for this condor when the market calms down in the next few days. Specifically, we are looking at short 750 Mar put and long 740 Mar put for around $0.60 to $0.70 credit. If we can get $0.70, we'll reduce our cost of buying back this spread by half. But until we feel that it is safe enough (that there is a very small probability that RUT will go near 770 or 780 in the next 14 days), we'll keep it as it is.

Yesterday's sell-down showed that our condor is resilient enough to absorb such a massive move in the market without causing a catastrophic loss.

Good trading,

Gary

Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com

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

12 Feb 2007

Dear subscribers,
Seems like the market is moving a little too fast. After we got filled this iron condor for $2.10, the price has been hovering around $2.00 to $2.15. After today, this price will be even lower. Therefore, we're revising our target price to $2.00 credit to have a better chance of getting this condor filled. The lowest you should try would be $1.95 credit for this condor.

12 Feb 2007

RUT Iron Condor initiated on 12 Feb 07

Trade Summary

RUT at 807.71
31 days to Mar expiration.

Sell RUT Mar 850 Call
Buy RUT Mar 860 Call
Sell RUT Mar 770 Put
Buy RUT Mar 760 Put

For a net price of $2.10 Credit or better.
Total margin required: $790.

Trade Analysis

With only 31 days left to March expiration, this iron condor offers us very good time premium. This is the second RUT iron condor we have for March. This first one was initiated on 1 Feb for $2.30 credit. This condor has a probability of 70.10% of being profitable. With a delta of 0.03, this condor is currently very market-neutral and we should expect its value to drop very quickly over the next few weeks.

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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