Weekly Newsletter   Challenge account   Weekly Newsletter   

SPX 2005/2010/2105/2110 Iron Condor in good shape to expire

This morning I opened a new trade – Iron Condor against the S&P 500 (SPX). My strikes are 2005/2010 puts and 2105/2110 calls. I collected $30 credit for this trade. Although there are still two days left until expiration the trade is in good shape to expire worthless.

With Iron Condor you want the underlying to stay between the two spreads. An Iron Condor consists from two spreads – a bear call spread and bull put spread. As with a bear call spread, you want the price of underlying to stay below your short call strike. Same with the bull put spread, you want the underlying to stay above the short put strike.

The above trade is constructed of the following legs:

Long 2110 call option
Short 2105 call option

Sooo, you want the underlying (in this case SPX) to stay here.

Short 2010 put option
Long 2005 put option

So, if the stock (SPX) stays between 2010 put – 2105 call, the trade expires worthless for full profit of the entire collected credit.

Will SPX stay between strikes making this trade a winning one?

Although there are two days left until expiration and the trade is in a good shape, everything can happen. We can see the market rallying like crazy this last two days and smash the call side of the Condor, or we can see a frantic sell off falling thru the put side.

If that happens, then I will have to deal with it and roll the endangered side or even close it for a loss. What are my expectations then?

SPX Iron Condor

As you can see from the chart above, the trade has more risk to the upside. The market must run only 37 points up to endanger the call side. That’s 18.5 point every day. And that is not something too unusual. For tomorrow, the expected move is 19.34 points up or down!

See for yourself:

SPX expected move

So, hope that the market stays flat as it was so far and there will be no violent move to the upside. If any violent moves should occur, let’s be it to the down side. The stock market would have to fall by 58.53 point in two days which is less likely.

If this trade expires then I will realize a nice profit of 6.4%.

Leave a Reply

Your email address will not be published. Required fields are marked *