As I described in my monthly report, I am slowly building my damaged account back up taking small trades and small income every week.

Last week, I opened a few trades against SPX – one bear call spread, and two Iron Condors. All expired worthless and I could keep all premium I received.

I will try to replicate such trades this week as well.

First, I need to assess what the market would do this week.

By looking at weekly and daily charts, I can see that on a weekly chart we are still bullish. But the daily chart tells a different story. The markets dropped the last few days. On Friday and today the markets tried to rally back.

Will this rally continue or is it just a return to the mean and we will see more selling coming?

Difficult question with even more difficult answer.

There are not too many events happening this week. We will see a FOMC meeting minutes on Wednesday and Jobless Claims on Thursday which may move the market either way (I would suspect up). I do not think that those moves will be that dramatic to breach my trade I put on today.

If so, I will move the leg of the trade or close it and sell a new one. Time will show.

Trade Detail

Today I entered the following trade (Iron Condor):

 

BTO 1 SPX Oct2 14 2020 call

STO 1 SPX Oct2 14 2015 call

STO 1 SPX Oct2 14 1920 put

BTO 1 SPX Oct2 14 1915 put

 
@ 0.45 LIMIT GTC
 

Typically, Iron Condor is a high probability trade, but its risk/reward is bad. With a high probability, it is OK to take such trade.

This trade will expire this Friday, October 10th, 2014. I collected a premium of $45.00 which translates into 9.78% gain if it expires worthless on Friday.

The max risk of this trade is $460.00 per contract and my margin requirement was $471.00 which will be blocked until Friday.

I believe, this trade will end up successful. I will hold it until expiration. Only if any leg of the Condor gets breached or endangered, I might roll it further away in time or roll it up by buying that leg and selling a new one. To do so, a sufficient cash reserves need to be sitting in a trader’s account (and that means mine too).

Let’s see how this trade ends up.

You can watch that trade on My Trades & Income page.

Happy Trading!