need help thinking through lifespan of iron condor

Discussion in 'Options' started by kevagonia, Feb 21, 2018.

  1. At risk of getting beaten up here, I am reaching out for advice on managing options from cradle to grave: new options seller, small account (<5k), using this to learn and earn some income. After researching, I feel that managing a portfolio of defined risk options is a good possible source of ongoing income and... maybe ongoing headaches if I don't continue to work hard and learn more.

    XLE (energy sector SPRD ETF) iron condor (march 16 exp) sold several weeks ago before recent volatility in markets.

    the wings are 69.5/70.5 puts and 82,83 calls

    currently trading at 66.56 with 22 DTE.

    I am considering just watching the thing recover, but out of all the options I've researched for days now, I can not find any real data as to when to actually adjust.

    1. wait: I like this idea. I made this choice for a reason and although it might have been a bad choice, letting my underdog run its race seems rational.
    2. rolling up the untested side to a different strike/expiration, ironfly, etc. : certainly the ironfly option seems to offer a very narrow chance of success and I have the impression it might be more useful when underlying is trading closer to my put spread...
    3. rolling out further when the time comes to remain in contention: OK... I can wait and try that, but when is enough enough?

    So if my impression is correct it is still early and I have time to take a watchful waiting approach. Thanks for any helpful comments. Any more data needed?

  2. Quiet1


    No-one knows what will happen in future so any conjectures about how to adjust are not really meaningful. Maybe a better way to approach it is to think whether you believe this trade still reflects the premise of why you put it on. If the spot/vols have moved much more than you expected you should just accept you were wrong, liquidate the trade and find a new opportunity to execute whatever edge you believe you have in finding quiet underlyings that will payoff for this option strategy.
    Cat88, kevagonia and drm7 like this.
  3. adjusting/rolling is BS. close and redeploy to whatever it is you like . I wouldn't go past 21 DTE
    misterkel and kevagonia like this.
  4. tommcginnis


    You are in a pickle, and it's way too late to 'adjust' out of this one.
    You're $3 under water, and have 3 weeks to go.
    (And on top, you can't even find a trade: dead market.)
    Time to GTFO.

    So the question becomes, how do you get 87¢ from the XLE?
    (AND perhaps, keep the risk at $1 wide? Or even, split $1-wide top+bottom and get ~45¢/side??)

    At this point, you're risking an additional 13¢ between the mid of the spread now, and its eventual worth with an ITM expiration. (Which is to say, you're not risking much. Sorry but, the damage done been done.:confused:) So, if you push your position out in time (and maybe sell a call position to get revenue neutral) you have a possibility of ending one of those expiries OTM. ("Yay, team!") At the least, if you progress from 70.5 to 68.5 to 66.5.... and each time book something from the call side......

    if you go out 1 week, you won't need to "buy" so much time value in your owned/long strike. As of tonight's close, the March23 69.5/68.5 would gross $1.24 -- an obvious thin-market mis-quote -- but it shouldn't be too hard to get a full point closer to the money, for perhaps your current $0.87. And in the meantime, sell another call spread.

    Milk that ITM down, week-by-week. Stay "up" on all things XLE, and make an informed decision as to when/whether to roll out again. TRY to roll down, but remember that, because you're ITM, time now costs you.
  5. comagnum


    Isn't the iron condor an endangered species?
  6. yes, they couldn't get off the ground... so to speak
    comagnum likes this.
  7. if I am reading you correctly, you're suggesting

    1. cut bait
    2. kick can down road and watch ETF for recovery by
    a. new iron condor with one point closer-to-the-money strikes in the put spread and... where for calls? very close to the money (narrow iron condor) an iron butterfly?
    b. possibly just sell another put spread closer to the money by one point, push it out one week (Mar29) and re-evaluate in a week. If XLE approaches the money either push out another week, maybe another point closer to mitigate losses and possibly end up a gain?

    I mean, this does sound better than kissing my 68$ after original credit goodbye.... also a learning exercise. I did manage to sell the worst energy sector ETF to get his with recent market turmoil.

    thanks for patience and your thoughts

  8. also we are talking closing original put spread and initiating new, or closing 4 legs to initiate some other bastardization of my original condor?

  9. newwurldmn


    Whats your view from here? Do you think the stock will recover? If so, by when?
    tommcginnis likes this.
  10. so I'm not an analyst or I would understand the sector more. The IV was high and I did not anticipate that all the high-IV underlying I had been choosing would explode with the market correction that occurred in January... however... I feel like it should recover at least partially and today has done so by nearly one point. I would like to think that more than 20 days is enough to wait this one out. I learn by watching people who know more than me though, and I feel like since I have chosen defined risk strategies as a way to learn options trading then I should have some tools in my toolbox for when things don't go my way. The "when" for me was just as important as the "what to do". There appears to be a non-interventionist school of thought and an "adjustment" school as well.


    #10     Feb 22, 2018