In the first part of this series on the topic of More Commissions and More Risk, the following claim was made: “One less trading day can make a big difference. The shorter the duration of having a credit spread exposed to market fluctuations, the better and the safer.” This article, the final one on this topic, will show how true that claim actually can be.
Once again iron condor trades were placed on the RUT and IWM. The specifics for each are listed below.
The Entries
Iron Condor on the RUT
BTO + 1 Apr wk B 850call @ 0.41
STO – 1 Apr wk B 845call @ 0.64
RUT on (4-05-12) $818.18
STO -1 Apr wk B 800 put @ 3.12
BTO +1 Apr wk B 795 put @ 2.36
Max Profit = 0.99 Max Loss = 4.01 ROR = 25% minus commissions
Figure 1: Iron Condor on the RUT for the second week of April 2012
The figure above shows fine tuning of the vertical spread by using five point wide strike increments on the RUT. When we move to the Russell 2000’s exchange traded fund, IWM, which trades at one-tenth of the RUT value, we see a difference. Look at the strike price involved on the IWM and compare them to the strikes on the RUT.
Iron Condor on the IWM
BTO + 1 Apr wk B 85call @ 0.07
STO – 1 Apr wk A 84call @ 0.14
IWM on (4-05-12) $81.58
STO -1 Apr wk A 80 put @ 0.41
BTO +1 Apr wk A 79 put @ 0.25
Max Profit = 0.23 Max Loss = 0.77 ROR = 30% minus commissions
Figure 2: Iron Condor on the IWM for… Continue Reading
