At approximately the 1 minute and 20 second mark I state that “Sellers step in;” I mis-spoke and should have stated that “Buyers stepped in.” (to push the price back up off the low)
Using the ETF (electronic traded fund) GLD (proxy for GOLD that trades at approximately 10% of the spot price) we are initiating a bullish biased trade into GLD using an options strategy known as a Broken Wing Butterfly.
We’ve been in the SEP GLD Butterflies for a while now; how do you get out of these trades? This is a very common question and I’ll do my best to provide an answer in this Live Trade Video.
Today is Friday, May 21 – Expiration Friday for May options. In this video I will be closing the in-the-money Put side of the QQQQ trade. The Call side will be left to expire worthless, thereby keeping the credit amount that was originally collected.
Patience proved to be smart this week as my DIA & SPY iron condors went ITM on the call side. With the VIX nearing 3 year lows, option premiums are sparse. March 17 & 18th I looked into adjusting both those positions. There was just not a trade out there that I liked. There is no premium to sell and I would have only been able to sell calls $1 higher than where my shorts are now. So with the markets extended, and the weekend approaching, I decided to wait. Today’s sell-off is just what my overall position needed as price slid a bit closer to the center of my risk graph. Pictured below is my DIA iron condor as of the close today.
There is a very high probability that this trade will need an adjustment but for now it does not look too bad.
There is a very high probability that this trade will need an adjustment but for now it does not look too bad.
The next picture is my overall position as of the close today:
These trades have all been open for nearly 2 weeks. Notice how the white line is starting to rise. As time marches on and implied volatility shrinks, my position is becoming profitable. The DIA is the product highlighted on this risk graph, but it is the same for the other products as well. Just the price on the bottom horizontal axis would change as I enter a new symbol. The Diamonds closed today at $107.34 and my short call is $108. A 2-3 point sell-off would put me exactly where I want to be in the profit picture. Time will tell, there are 28 days until April expiration.
Monday, the EEM will have May options available to trade. I will start looking at double calendars in that product and will hopefully find a trade I like early in the week. It will be interesting to see how a 4th trade will impact the risk graph. If I place a trade which fills, I will post a before & after risk graph in my journal.
Tuesday March 9, 2010
Today I have decided to be a bit more conservative with my iron condors. With the SPY approaching yearly highs I have decided the calls need to be higher, further OTM. This will mean less premium, but perhaps a bit more protection. However, should the trade need adjusting, I feel confident about the moves to make. So with that I am moving the calls to 117/119 and the puts down to 108/106. Routed and filled for a 74 cent credit.
The DIA calls will be the same 108/110 but I am bringing the puts up to 101/99. Routed and filled for a 76 cent credit.
Since neither iron condor was filled yesterday, I decided to re-evaluate and re-route. This is planning my trade and trading my plan. I like these new trades. I received a little less premium but have more room for the market to rally.
Going forward, I will monitor the markets a couple of times intraday. The only concern I would be if the markets were to rally significantly. A big drop does not hurt my iron condors, but the IWM double calendar most likely would need an adjustment. After the close, I will look at the overall and individual risk graphs. Going forward there will not be much to do but wait.
