I am little baffled by the adjustment you made. So you opened the position. bot feb 540/530 put/short feb 53 iwm put@ cost of $197.06 Now you have hedge since your 53 iwm is hurting. bot feb 450/440 put spread@ cost of $532.36 Total cost of the position is now 197 + 532 = 729. Let's say you managed to close 540/530 for 930 than you get 200 bucks in your hand. What if RUT rallies to 480. Do you think you can sell 450/440 for the same price as loss on 53 IWM? I think you should be safe on the down side since your break even is now at about 31 (33 - 2). This is all assuming that RUT is no where near your strike just before expiration (SET can screw you bad) so you have to count 50 bucks of loss of commission for one position.
Well you have to remember the reason for the adjustment which was that a strong support level (440) on the RUT was broken which means my next target for the RUT was (still is) down in the 400 - 410 range before we get to the 490 - 500 range. So at the time the important thing is to try and protect yourself from a large downside move. The 450/440 spreads give me a couple more points of downside breathing room especially since I am thinking the market will go down more before up. There is also a specific reason why I chose the 450/440 put spreads. The reason is that there are several small pieces at work here in this position. I own the following: bot feb 540/530 put/short feb 53 iwm put@ cost of $197.06 bot feb 450/440 put spread@ cost of $532.36 bot feb 440/450 call/short feb 45 iwm call@ cost of $163.54 So once I sell my 540/530 put spread, this position will become a 440/450 box spread which is guaranteed to pay $1000 regardless of where the RUT settles, and the position is hedged with a short strangle consisting of the 45iwm call and 53 iwm put. So now if the market rallies as long as it stays between 45 and 53 I can still make a decent profit. So assuming we close at 48 on the IWM (480 RUT) the following would occur: cost = 197 (original 540/540/53iwm put) - 930(sell 540/530 put + 532 (450/440put) + 163(440/450 call) = -$38 So the cost of the 440/450 box and 45/53 short strangle is a $38 credit, so if RUT settles at 480 (approx 48 iwm) it results in: profit = 1000(payout of 440/450 call spread) - 800 (cost of closing the 45/53 strangle) + 38 (original cost of position) = $238. So now if rut settles between 450 and 530 then I make a $238 profit. If the market sells off below 440 then I have a little bit of protection from the new 450/440 put which is a pretty decent size profit zone. Finally a word on commissions. I'm doing pretty small volume here so there should be no reason for my commission costs to be too much. For instance buying the 540/530/short iwm 53 put cost me a total commission of $2.36 + $.70 = $3.06. So my commission cost is only 3 bucks for opening and 3 bucks for closing, so if you are paying significantly more than that to do such low volume trades then I would suggest looking for a new broker. I have used IB for a long time which has its pros and cons, so since my commissions are pretty cheap I'm not too worried about the cost of adjusting.
I closed my final march quarterly position today and also sold both of my 540/530 put spreads. Here is a list of what I currently have: Closed positions mar 480/490 call/short marQ 49 iwm call @ profit of $44.60 mar 460/470 call/short marQ 47 iwm call @ profit of $51.28 Open positions short feb 46 iwm call@ credit of $340.58 bot feb 520/510 put/short feb 51 iwm put@ cost of $42.06 bot feb 450/460 call/short feb 46 iwm call@ cost of $148.06 bot feb 440/450 call/short feb 45 iwm call@ cost of $137.06 bot feb 500/490 put/short feb 50 iwm put@ cost of $112.06 bot feb 440/450 call/short feb 45 iwm call@ cost of $163.54 bot feb 510/500 put/short feb 50 iwm put@ cost of $128.06 bot feb 520/510 put/short feb 51 iwm put@ cost of $147.06 bot feb 530/520 put/short feb 52 iwm put@ cost of $172.06 bot feb 450/440 put/short feb 53 iwm put@ credit of $297.82 bot feb 450/440 put/short feb 53 iwm put@ credit of $278.82 bot mar 420/430 call/short mar 43 iwm call@ cost of $153.06 bot mar 410/420 call/short mar 43 iwm call@ cost of $128.54
Now the adjustment you did makes a sense. A box spread!!!! Wow!!! The reason you don't see too many comment here is because your trading technique is for very advanced option trader. Another question - how do you close your position since it combines RUT and IWM? Do you close RUT spread first and than IWM since it's easy to get out of IWM (less diff in bid/ask) Vs. you might have to wait and watch for RUT to get the right pricing?
Yes unfortunately I have not figured out how to combine purchasing a vertical spread on RUT and at the sametime selling an iwm option all in one combo trade using IB. So right now I will usually enter my RUT trade and once that fills I have a very tight "mental" stop where the iwm hedge gets sold separately. The spread on RUT isn't too bad compared to the rip-offs on SPX. Thats the primary reason why I'll never trade another SPX spread is because of the downright abusive b/a on SPX, but the RUT isn't too bad. As for the market.....feels like another big move is coming. We've basically held fast around the 430-440 level and at the sametime we were putting in lower highs which usually means another breakout of breakdown is near. Today we once again held above 440 and put in a slight higher high which seems to suggest that we may rally higher......problem is my gut says 400 but the fact we keep holding 430-440 regardless of all the bad news seems to indicate a move higher.....so the picture is grey, if we do get a move it should be pretty explosive in the realm of a 10% move either up or down over a couple of days. Either way I'll have to wait and see where we go. One thing to consider is that my feb option positions have already generated more than 2.5% which is my target if I was to close them all out right now.....so I may do this.....why step in front of a train if you don't have to! Anyway, only time will tell. I've added a march put position today. Closed positions mar 480/490 call/short marQ 49 iwm call @ profit of $44.60 mar 460/470 call/short marQ 47 iwm call @ profit of $51.28 Open positions short feb 46 iwm call@ credit of $340.58 bot feb 520/510 put/short feb 51 iwm put@ cost of $42.06 bot feb 450/460 call/short feb 46 iwm call@ cost of $148.06 bot feb 440/450 call/short feb 45 iwm call@ cost of $137.06 bot feb 500/490 put/short feb 50 iwm put@ cost of $112.06 bot feb 440/450 call/short feb 45 iwm call@ cost of $163.54 bot feb 510/500 put/short feb 50 iwm put@ cost of $128.06 bot feb 520/510 put/short feb 51 iwm put@ cost of $147.06 bot feb 530/520 put/short feb 52 iwm put@ cost of $172.06 bot feb 450/440 put/short feb 53 iwm put@ credit of $297.82 bot feb 450/440 put/short feb 53 iwm put@ credit of $278.82 bot mar 420/430 call/short mar 43 iwm call@ cost of $153.06 bot mar 410/420 call/short mar 42 iwm call@ cost of $128.54 bot mar 480/470 put/short mar 47 iwm put@ cost of $133.06
I don't understand the basis of following position. mar 480/490 call/short marQ 49 iwm call @ profit of $44.60 Usually you go out 10-20 pt in the money but this seems to be way too much in the money. Even though you are not sure, you are anticipating move higher or you have a paird position.
This was a call position that I had opened several weeks ago when the RUT was trading above 500. I decided to close it last week because I prefer to have the normal march IWM rather than the quarterly IWM option. I was able to close that position out for a $44.60 profit. The put position I opened was a 480/470 put. When I opened it, the RUT was trading around 452 which is in the 20 - 30 pt in the money range.
I decided to go ahead and close some positions and lock in profit today. I closed the following: 1)short feb 46 iwm call for $191.70-> profit = 340.58-191.7 = $148.88 2)bot feb 450/460 call/short feb 46 iwm call for $330.57-> profit = 330.57-148.06 = $182.51 3)bot feb 500/490 put/short feb 49 iwm put for $336.66-> profit = 336.66-112.06 = $224.6 4)bot feb 510/500 put/short feb 50 iwm put for $306.94-> profit = 306.94-128.06 = $178.88 I have also added another march put position today and I'll be looking to lock in some more profit tomorrow. Closed positions mar 480/490 call/short marQ 49 iwm call @ profit of $44.60 mar 460/470 call/short marQ 47 iwm call @ profit of $51.28 short feb 46 iwm call@ profit of $148.88 bot feb 450/460 call/short feb 46 iwm call@ profit of $182.51 bot feb 500/490 put/short feb 49 iwm put@ profit of $224.6 bot feb 510/500 put/short feb 50 iwm put@ profit of $178.88 Open positions bot feb 520/510 put/short feb 51 iwm put@ cost of $42.06 bot feb 440/450 call/short feb 45 iwm call@ cost of $137.06 bot feb 440/450 call/short feb 45 iwm call@ cost of $163.54 bot feb 520/510 put/short feb 51 iwm put@ cost of $147.06 bot feb 530/520 put/short feb 52 iwm put@ cost of $172.06 bot feb 450/440 put/short feb 53 iwm put@ credit of $297.82 bot feb 450/440 put/short feb 53 iwm put@ credit of $278.82 bot mar 420/430 call/short mar 43 iwm call@ cost of $153.06 bot mar 410/420 call/short mar 42 iwm call@ cost of $128.54 bot mar 480/470 put/short mar 47 iwm put@ cost of $133.06 bot mar 490/480 put/short mar 48 iwm put@ cost of $172.06
If you managed to gain money in such a volatile market, when volatility returns to normal, I would expect double the gain. Keep up the good work.
I went ahead and locked in some more profit by closing some positions. I closed the following today: 1) bot feb 520/510 put/short feb 51 iwm put for $356.96-> profit = 356.94 - 42.06 = $314.88 2) bot feb 520/510 put/short feb 51 iwm put for $347.94-> profit = 347.94 - 147.06 = $200.88 3) bot feb 530/520 put/short feb 52 iwm put for $329.34-> profit = 329.34 - 172.06 = $157.28 The only positions I have open for feb are my 440/450 box spread with the 45/53 short strangle. Each short strangle still has about $150 of premium that needs to be sucked out so I am going to go ahead and leave the box/strangle combo open till the 150 premium is sucked out. As long as iwm is between 45 and 53 at expiration then each of the box/strangle positions should generate about $300 of profit. My breakevens are around iwm 40 on the downside and iwm 55 on the upside, so the profit zone is pretty wide which is why I'm letting the strangling box run. Also added another march put position today. Closed positions mar 480/490 call/short marQ 49 iwm call @ profit of $44.60 mar 460/470 call/short marQ 47 iwm call @ profit of $51.28 short feb 46 iwm call@ profit of $148.88 bot feb 450/460 call/short feb 46 iwm call@ profit of $182.51 bot feb 500/490 put/short feb 49 iwm put@ profit of $224.6 bot feb 510/500 put/short feb 50 iwm put@ profit of $178.88 bot feb 520/510 put/short feb 51 iwm put@ profit of $314.88 bot feb 520/510 put/short feb 51 iwm put@ profit of $200.88 bot feb 530/520 put/short feb 52 iwm put@ profit of $157.28 Open positions bot feb 440/450 call/short feb 45 iwm call@ cost of $137.06 bot feb 440/450 call/short feb 45 iwm call@ cost of $163.54 bot feb 450/440 put/short feb 53 iwm put@ credit of $297.82 bot feb 450/440 put/short feb 53 iwm put@ credit of $278.82 bot mar 420/430 call/short mar 43 iwm call@ cost of $153.06 bot mar 410/420 call/short mar 42 iwm call@ cost of $128.54 bot mar 480/470 put/short mar 47 iwm put@ cost of $133.06 bot mar 490/480 put/short mar 48 iwm put@ cost of $172.06 bot mar 490/480 put/short mar 48 iwm put@ cost of $183.06