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Trade Recommendation |
| 12 Jan 2007 Close Recommendation for SPY Double Diagonal initiated on 22 Nov 2006 Trade Summary
Trade Analysis With only 6 days to go before Jan expiration, we feel that now is a good time to close up this trade since the positions are not generating enough theta (time decay) to worth keeping it. If we can close it for $0.15 or less, we not only lock in our profit, we also eliminate all our risk. We see no point in keeping this condor till expiration. We can only earn another $0.15 and save on some commissions if we were to let the condor expire worthless in 6 days. However, we think that the $0.15 extra is not worth the risk. Many things can happen in 6 days, including the possibility of S&P500 gaining another 20 points to hit 1450. So we rather lock in our profit now. For this trade we made a $60 profit per position using a margin of $205. That is a 29.27% return on investment. We will continue to scout for trades that fit our requirements and keep you posted. Gary Founder,
Head Trader of MarketNeutralOptions **************************************Trade History*************************************** 15 Dec 2006 Roll recommendation for SPY Double Diagonal initiated on 22 Nov 2006 Trade Summary
Trade Analysis Although we are getting a less than expected credit of $0.80 for this roll into a Jan iron condor, we have probability on our side. The breakevens for this iron condor will be 137.25 and 145.75. We have a probability of 63.59% that SPY will expire between our breakevens in Jan expiration. We will have a positive expected value of $2.18 per trade for this condor. [($75X0.6359) - (125X0.3641)] We are risking $125 to make $75 with a probability of success of 63.59%. We'll keep a close eye on this trade and inform you when the suitable time to close up this trade comes. We are having some difficulties finding good trade lately mainly due to the low IV. In this low IV condition, it'll be suitable to put up some calendar spreads. I won't recommend calendar spreads in this advisory at this moment. I may put up some of my personal entries in our blog over the weekend for all to analyze. Have a great weekend! Gary Founder,
Head Trader of MarketNeutralOptions *********************Trade History************************ 22 Nov 2006 SPY Double Diagonal initiated on 22 Nov 2006 Trade Summary
Trade Analysis This double diagonal has about 5 points of headroom. Translate to the S&P 500 index, it is a whopping 50 points of headroom. As long as SPY stays below 145 before Jan expiration we can expect to make some money from this trade. However, as the past few months shown, it is not impossible for the market to leap 50 points in 2 months. For this recommendation, we are using the Dec Quarterly options for our short because the standard Dec options have very little premium left in them. Do take note that Quarterly options do not expire on the third Friday of the month. Instead they expire on the last trading day of the month. We will most probably roll out our short options by then. There is a probability of 66.35% that SPY will expire within our profitable range in Dec expiration. The current Dec/Jan roll value stands at $1.20 credit (see diagram below). If we can roll at this value when the time comes, we'll have an iron condor for a very good price.
We will inform you when it is a good time for us to roll this double diagonal into an iron condor. Gary Founder,
Head Trader of MarketNeutralOptions
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