10 Jan 2007

Close Recommendation for DIA Iron Condor initiated on 19 Dec 06

Trade Summary

DIA at 123.90
9 days to Jan expiration.

Buy DIA Jan 126 Call
Sell DIA Jan 128 Call
Buy DIA Jan 123 Put
Sell DIA Jan 121 Put

For a net price of $0.50 Debit or less.
Profit or Loss: +$35.
Percentage Profit:
35/115 X 100% = 30.43%

Trade Analysis

We are closing up this iron condor for a $35 profit for each entry. This was a late condor. When we entered this trade we only have 30 days of decay left. That explains the low credit we received. However, DIA did stay within the range and it is now worth only $0.50. We decided that now is a good time to close up this position because we are really not sure what the market will do in the next few sessions and with DIA less than $1 away from our short put, we think that it is wise for us to lock in our profit now. All it takes is just 1 major down day on the Dow and this condor will be worth more than the $0.85 credit that we received. Although the profit isn't fantastic, it is pretty decent.

We are currently stalking a few potential late condors for Feb but we are facing problems getting them filled. Once we can get filled the potential positions, I'll let you know immediately.

Gary

Founder, Head Trader of MarketNeutralOptions
www.MarketNeutralOptions.com

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

19 Dec 2006

DIA Iron Condor initiated on 19 Dec 06

Trade Summary
DIA at 124.36
30 days to Jan expiration.

Sell DIA Jan 126 Call
Buy DIA Jan 128 Call
Sell DIA Jan 123 Put
Buy DIA Jan 121 Put

For a net price of $0.85 Credit or better.
Total margin required: $115.

Trade Analysis

With only 30 days to Jan expiration and IV at the lows, out-of-the-money (OTM) options will decay very fast. This iron condor does not offer us a 1:1 risk/reward and the probability of success is currently only 48.56%. This condor is constructed more on the basis of technical analysis than probability.

Our breakeven points are 126.85 for the upside and 122.15 for the downside. Looking at the current value of the Dow (12454.09), the Dow would have to advance another 230 points to hit our upside breakeven. I'm not suggesting that it won't happen. I have no idea what Dow would do next. But chances are there that we may be able to get out of this trade by the time Dow hits our breakevens. Again I'm not suggesting that the Dow can't move 200 points in 2 days. We are risking $115 to make $85. The worst that can happen is we'll lose $115 for every trade we enter. Here is where good risk management is important. We always advise our subscribers not to over-trade. Never enter a trade that requires more than 10% of your capital.

We'll keep a close eye on this trade adn advise you accordingly when it is a good time to close and lock in profit.

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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