This article aims to reveal some of the possible options a trader has once one short side of an Iron Condor is exited after buying back that obligation.
Original Position:
Basically, the short Iron Condor has the expectation that the underlying will stay within a given range. The Bear Call spread carries a margin as well as the Bull Put spread; both of them being short verticals. The logic is that the trade cannot be wrong at both ends at the same time. It is possible to be wrong at different times, if the position was unwound. The specifics of my position on the Russell 2000 (RUT) are given in the next two figures.
Figure 1
The chart above shows a red line representing the sold 865 call and the green line being the sold 820 put. The table below lists the current price of the underlying as well as the respective premiums received from the sale of this specific Iron Condor position.
Iron Condor on the RUT
BTO + 12 Sep wk B 870call @ 0.32
STO – 12 Sep wk B 865call @ 0.51
RUT on (9-06-12) $841.12
STO – 12 Sep wk B 820 put @ 1.53
BTO + 12 Sep wk B 815 put @… Continue Reading
