Opened the Upper Legs of some November SPY Iron Condors today. Sold 150/151 Bear Call Spreads into Resistance at 140.02. Is 150 high enough? Time will tell. Will now wait for a Pullback to a Higher Low in the Uptrend (around 135?), and then Open the Lower Legs. Probably with 130/129 Bear Put Spreads, for a total Range of 20 points. Should make 13-15% per month on the trade, if all goes according to plan. Anyone else doing "Steady Eddie" trades like this?
I have not traded the SPY... been trading Iron Condors (legging into them) on RUT and NDX.... But always farther out... I look at Deltas of below 5 before I trade. Not 10-15% a month, but maybe 2-3%, but I can sleep at night.
@cactiman: How much of your account do you allocate to an IC trade? What do you do if it goes against you?
Nothing you can do but take the loss, or wait it out to expiry. The short options of the IC are you insurance to minimize the loss, a very simple concept which doesn't need second guessing once the position is open.
That's why I asked him about position sizing. If taking a close to total loss is the only option then the overall position should be fairly small.
Roll parameters.. there's a article about it in the last stocks and commodities mag call queen of condors. Its on the rut to...
The Queen Of The Iron Condors Find out what one trader did when her favorite trading vehicle was down 43 points one Monday, en route to a 25% Julyââ¬âOctober, top-to-bottom loss. by John Sarkett her worldwide trading community, Amy Meissner is known as ââ¬Åthe queen of the iron condors.ââ¬Â Part of that is attitude. There was one recent day when the Russell 2000 (RUT), her favorite trading vehicle, was down 43 points en route to a 25% Julyââ¬âOctober, top-to-bottom loss. ââ¬ÅI wasnââ¬â¢t worried,ââ¬Â she explained. ââ¬ÅFirst of all, the RUT was already oversold. Second, the catalyst for the loss was political wrangling in Washington over the debt ceiling, something that had been going on for months. And my short put options had only moved from -8 delta to -14 delta on the open, then -16 during the day, and 16 is where I adjust. It was manageable.ââ¬Â Itââ¬â¢s that kind of unflappability that makes Meissner wellsuited to her role as an option queen. Third timeââ¬â¢s the charm Meissner began her trading in the 1990s. ââ¬ÅI learned about options from an article I had read and I decided to give it a try,ââ¬Â she explains. ââ¬ÅIt was much more expensive to trade back then, and only special brokerage firms would trade options.ââ¬Â She started by selling SPX credit spreads. The venture lasted several months before she gave it up. Meissner decided to give the option initiative another look in 2005, opening a $20,000 discretionary account with an online advisory firm. Their specialty: iron condorsAt the outset, it was steady as she goes. It took about half a year to boost the account to $28,000, a 40% return ââ¬â stunning, especially in the aftermath of the 2000ââ¬â01 tech meltdown. Then came sudden destruction. ââ¬ÅOne Wednesday before expiration, I was nervous about holding through Friday, and said I wanted to cover,ââ¬Â she recalls. ââ¬ÅThe traders assured me there was a high statistical probability of the options going out at zero.ââ¬Â It was part of the firmââ¬â¢s method to let options expire worthless. It was a good idea, until itââ¬â¢s not. You know what happened next. Trying to accumulate the last few pennies, with no risk management plan in place other than an aim for those options to expire worthless, Meissner lost $14,000 on a large down move in her account and was cut in half. A short time later she received a postcard in the mail promoting a new service, something called ââ¬Åoption mentoring.ââ¬Â She was intrigued enough to give it a go, thinking that with some hard work she would be better able to manage her own funds versus trusting others with a discretionary account. So she went back to school, this time into the school of risk management. It was her best investment, she says now, and with annual returns averaging 22.46% since trading on her own, it has repaid itself many times since then.Six years later, Sheridan Option Mentoring is still part of her team. It was Dan Sheridan who nicknamed her ââ¬Åqueen of the iron condors.ââ¬Â Meissner is ââ¬Åone of the most professional traders in our community, and one of the most consistent,ââ¬Â he says. ââ¬ÅShe will tweak her approach from time to time, but by and large, she approaches the market with admirable discipline, and as a result, she reaps the rewards.ââ¬Â The method Meissnerââ¬â¢s methods have been refined a bit since she started trading iron condors, but hereââ¬â¢s her latest methodology (Figure 1). Approximately 80 to 88 days out she will sell a Russell 2000 iron condor. She sells the puts at minus 8 delta or so, the calls at 12 delta or thereabouts, and then buys coverage some 30 points higher on the calls, 30 points lower on the puts. She aims to generate an approximate $4 credit against a $30 risk. The total cash credit then would be about $4,000 for every 10 contracts ââ¬â that is, $4 credit x 10 contracts x $100 per contract. Should the market move against her, which is often the case, she will adjust at -16 delta, meaning that if the market declines, she will buy in her put credit spread, and then resell it 30 RUT points lower. She will sell 150% of the original size as well to make up for the loss (if the original position was 20 contracts, she will sell 30 on the adjustment). She can do this two or threetimes before giving up on a trade and either taking a loss or scratching out. If the market declines and the call credit spread goes to 0.40 or under (from an original $2 or so), she will exit, and not resell it lower. This removes the possibility of whiplash should the market bounce back up and cause a new call spread to become a loser very quickly. The process is reversed to the upside (Figure 2). Changes over the years include days to expiration and entry style. She began with more customary 30- and 60-day condors, one of each, but she has now settled on the longer time frame due to the volatility in the market. She originally legged into the trade, selling put credit spread side when the market was down, selling the call credit spread when the market rebounded, but since then has decided it is simpler, more effective, and more carefree to put it all on at once, because losses on one side will be offset by gains on the other. Unlike many traders whose ambition is to get big as fast as possible, which for most means 100-contract condors and up, thus theoretically putting $90,000 and more of risk on the table each month, Amy Meissner is more stealth. For every 100 contracts of a typical 10-point condor, she will trade 25 contracts of a 30-point condor instead, cutting her risk to about $65,000. Why not 10-point wide strikes in her RUT condors, like most everyone else in options? Adjusting large quantities of contracts is a factor. Start with 25, roll twice for adjustments, and you wind up with about 55 to 60 contracts, versus 225 with a 100-contract start increased twice at 150%. Fifty-five contracts is much more manageable than 225 contracts, Meissner says. Her profit target is approximately 80% of the original credit. If she is taking in $10,000 on a typical trade on initiation (25 contracts x $4 x $100 per point on the RUT), and she can offset her positions and capture $8,000, sheââ¬â¢s out. Often this is the case after 45 days.There will be blood There will be losers as well. It is part of the business, expected and managed. Meissner describes the process as ââ¬Åthree or four steps forward and one step back.ââ¬Â On the monthly level, she will typically expect to lose or break even one or two or even three months a year (though in 2011 there were no monthly losses, as you can see from Figure 3) but keeps the losses to 100% to 150% of her typical monthly credit ââ¬â that is, $10,000 or so. Employing some quick math, if she can generate about $8,000, 10 months per year, and expect losses twice of $10,000, she can still net something like $60,000 per year, just with the RUT condor alone. And do it without breaking much of a sweat.Pieces and prospects Here are a few odds and ends of Meissnerââ¬â¢s trading strategy: n She uses Investors Intelligence to help formulate a market opinion. This helps her get a handle on oversold and overbought conditions and gives her a second opinion useful for determining adjustment sizes, leaning her deltas to long and short, and so on. n She likes to enter condors on Thursdays or Fridays to gain weekend decay. n She sets alerts for both RUT and deltas, sending messages to her emails and smartphone. This helps her get off the screen as well. n She is part of a larger trading community via Sheridan Option Mentoring. She appropriates new ideas and concepts and also contributes as a thoughtful webinar interview subject. There are some six-plus hours of her discussions archived on the site, plus other discussions on her methods. Boiling it down as simply as possible, Meissner earns her monthly checks by rolling her credit spreads. She aims to increase her returns going forward by being more consistent, to make her condor work an even smoother-running money machine. Recently, she purchased an electric motor-assist bicycle to help her make her 25-mile bike expeditions a little easier against the ocean winds, a nice metaphor for her powerful ability to tame and manage the winds of market change. <a target='_blank' title='ImageShack - Image And Video Hosting' href='http://imageshack.us/photo/my-images/16/rutironcondor.png/'><img src='http://img16.imageshack.us/img16/4391/rutironcondor.png' border='0'/></a><br>Uploaded with <a target='_blank' href='http://imageshack.us'>ImageShack.us</a>
here is her 2011 record.. <a target='_blank' title='ImageShack - Image And Video Hosting' href='http://imageshack.us/photo/my-images/641/rutic.png/'><img src='http://img641.imageshack.us/img641/2253/rutic.png' border='0'/></a><br>Uploaded with <a target='_blank' href='http://imageshack.us'>ImageShack.us</a>