9 Feb 2007

Close Recommendation for RUT Iron Condor initiated on 12 Jan 07

Trade Summary

RUT at 807.46
5 days to Feb expiration.

Buy RUT Feb 830 Call
Sell RUT Feb 840 Call
Buy RUT Feb 750 Put
Sell RUT Feb 740 Put

For a net price of $0.35 Debit or less.
Total margin required: nil

Trade Analysis

We'll take advantage of today's drop on the RUT to close up this trade. I managed to get this filled for $0.35 so this shall be the target price to close this trade. There is no reason to maintain this position as most of the time value has decayed. We entered this IC for a $2.40 credit om 12 Jan and we're now closing it for $0.35. This recommendation made a profit of $205 per entry. That is a 26.97% profit ([205/760] X 100%). We are queuing for a Mar IC on the SPX. But so far still no luck in getting it filled.

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

12 Jan 2007

RUT Iron Condor initiated on 12 Jan 07

Trade Summary

RUT at 792.19
33 days to Feb expiration.

Sell RUT Feb 830 Call
Buy RUT Feb 840 Call
Sell RUT Feb 750 Put
Buy RUT Feb 740 Put

For a net price of $2.40 Credit or better.
Total margin required: $760* (this trade is not advisable if this margin requirement is more 10% of your total capital).

Trade Analysis

We have been stalking this iron condor for the last few days. We were also looking at one condor with the SPX, which is a 5-point wide condor. We got filled for this RUT (Russel 2000) condor first. So this is the alert. Using RUT has 1 very obvious disadvantage: it's a 10-point wide position. What this means is that you will require more margin. For this trade, we are risking $760 to make $240. The reason why we put up this trade lies in the probability of success. When we got filled this position, the probability that RUT will expire between our breakeven points in Feb expiration day is 71.3%. This probability is more than a standard deviation (68%). We advise subscribers not to put up this trade if it requires more than 10-15% of your capital.

It is not easy to get this condor filled. Please have some patience. Do not enter this trade for less than $2.35 credit. You will end up exposed to more risk to make this trade worthwhile. If you can get it filled at more than $2.40, good for you! Good luck!

With only 33 days to go, this condor will decay fast. We will buy back this condor as soon as we generate a decent profit or at the first signs of trouble.

Gary

Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com

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