From: Russell Rhoads, PhD, CFA from ListDer Research Today, four minutes into the trading week, with the Russell 2000 (RUT) at 1947.93, a trader opened an iron condor that expires today on the close. The specific trade sells the RUT Jan 8th 1985 Call for 0.23, sells the RUT Jan 8th 1915 Call for 0.19, and then purchases the 1905 Put for 0.11 and the 1995 Call for 0.13 resulting in a credit of 0.18. The payoff on the close today appears below. The dollar risk (4.82) versus the reward (0.18) is concerning until we note what must happen over the course of hours for this trade to fail. The short strikes are 1.70% lower and 1.90% higher than where RUT was quoted when the trade was executed. You can tack on another 50 basis points in each direction for the worst-case scenario at expiration. We will keep an eye on the options in this trade for the balance of the day, just in case RUT approaches either short strike, but our assumption is that this will be held to expiration on the market close today.
Curious why he opened the trade at the open when the market had been trending down past few days and was likely to retrace some of that. He ended up opening the trade at the LOD. I know next to nothing on these type trades, but is there a way to structure that so it is more bullish? Risking $4.20 to make .18???