Hi Mark
Please tell me which of these two IRON CONDOR -for RUSSELL
2000 that you prefer and why?
CASE 1:
RUY P SEP 680/670
RUT C SEP 790/800
NETT CREDIT=$2.90
CASE 2:
RUY P SEP 650/640
RUZ C SEP 820/830
NETT CREDIT=$1.05
RUT CLOSED TODAY= 753.37
Thanks
NG
Hello NG,
Today is expiration day for August options and September expiration
is five weeks away (this is for someone who reads this in the future).
1) I prefer October, or November options, but that's not what you
asked.
2) I also note that each of your iron condors feels 'short' because
the calls are closer to the money than the puts.
3) To answer the question: I prefer CASE 1. And it's not a close
decision.
- Although there is a greater chance of being forced to make
an adjustment, I find the $1.05 credit is too small for my comfort
zone. I do admit that the chance to earn 10% over the next five weeks
is very attractive, but I (and you asked for my opinion) don't like to
hold options through expiration. I prefer to close early. When I sell
for $1.05, there is not enough profit potential if I pay 40 to 50 cents
to close. If closing early is not a consideration for you, then I can
see more merit in choosing case 2 - but not enough to change my vote.
- If trying to earn $1.05 was my goal, and if I were forced
to choose one of these, I'd prefer to sell @ 2.90 and try buy back @
1.50 to $1.70 - making more money in significantly less time. Despite
the chance of moving into the money, I know I'd own the position for
less time and that would be enough reason for me to choose CASE 1.
Remember, you are not forced to hold - you may take your profit anytime
you so desire (assuming it's available). Most people think they ust
milk an iron condor for all they can get. If your goal is to make $100
per spread, then CASE 1 should be an easy choice. I did not do the
math to back up that claim, but it 'feels' much easier to make that
$100.
- I would buy an equal number of whichever iron condor I
chose. I do not believe in buying more just because the credit is
smaller. After all, the maximum loss is greater - even if less likely.
Mark
--
Mark D. Wolfinger
The Rookie's Guide to Options:
The Beginner's Handbook of Trading Equity Options
website: http://www.mdwoptions.com
blog: http://blog.mdwoptions.com/options_for_rookies
Free eBook: http://www.mdwoptions.com/freebook.pdf