Open: IWM Skewed Iron Condor +26%

This is the first Skewed IC I’ve traded. I’m still working on my rules.

What is an Iron Condor?

An Iron Condor is a combination of two vertical spreads. A bear call spread above resistance and a bull put spread below support. If your broker is at all worth its weight they will only hold half the margin required since the ETF or Index can only close ITM for one of the Vertical spreads. This way you bring in more of a credit for the same amount of margin.

Why would you want to trade and Iron Condor?

Trading IC’s can be a great neutral strategy to bring in income on a monthly basis. Let’s say that you are Neutral on an ETF or Index (expect a sideways move or a slightly directional move) .

Why would you want to trade a skewed IC?

A Skewed Iron Condor is “skewed” to one direction or the other. If you are more Bearish or Bullish on the ETF or Index you can add more contracts or weight the Iron Condor on the opposite side. Example: IF you are bullish you would add more PUT contracts then CALL contracts. You can also add more distance between the strikes. This will increase your margin, however done correctly you can create a situation where even if the call spread is ITM you will not lose money.

OPEN 1/28/2008

STO Skewed Iron Condor

Market Bias: Neutral to Bearish.

- 2 FEB08 IWM 72 Call .79

+ 2 FEB08 IWM 74 Call (.36)

- 1 FEB08 IWM 64 Put .83

+ 1 FEB08 IWM 63 Put (.64)

Total Credit = +1.05

Max loss above 74 is 4.00

Max loss below 63 is +.05 (I make $5)

CLOSE:

Expired Worthless 2-15-2008

CLOSE: AAPL 145/150 Short Put Vertical -80%

I did not roll out of this trade. If you did roll, you are sitting on a nice profit right now.   I took the Max Loss of 400.

Lessons paid for on this trade:

• Cost of failing to take action on preset exit rules.
• How TOS Calculates P/L on Verticals
• Cost of Greed and Fear.

I failed to exit this trade prior to earnings with 80% profit. “cause AAPL always blows out earnings and won’t be too effected by this bearish market. Besides in doing my expectancy calculations for last years trades it was better to hold for max loss then attempt to leg out emotionally.” (Failure to take action on trading plan/ Greed)

I failed to exit after trend was clearly broken for a smaller loss.  “Cause it could come back and I don’t want to take this loss.” (Greed/Fear both)

How TOS calculates P/L on Verticals  Current Mark Price – Credit  (duh!)  FYI though don’t bother looking at the P/L % for Spreads. Its too confusing. Better to do it manually.

Open MNX IC

Open IC on MNX

Support at 185 (195)
Resistance at 175 (165)

Trend Neutral to bearish.

BTO 165 , STO 167.5

BTO 187.5 STO 185

Credit 1.35

Break Even: 166.15 and 188.35

Max gain 1.35

Max Loss 1.15

80% probability of success.

I will add a broken butterfly to the top around 185 on weakness

I will add a broken butterfly to the bottom around 175 on strength.

Close at 80% profit

Close 7-14 days before expiration if profitable.