Tuesday, December 11, 2012

Rolled up SPX Iron Condor in high probability paper portfolio

Yesterday, my paper portfolio testing 2 month high probability, market neutral strategies showed a delta of -39 and prices went to the right slope of P&L chart. So I reviewed the positions and found the SPX Iron condors required adjustment.
My adjustment goal was reducing Delta while maintaining similar profit if possible. To buy back the $11.40 IC and sell the new $10.05 IC, I had a deficit of $1.35. Thus, I also rolled up the $1.05 put spread (debit) to a new  $3.05 put spread (credit). In this way, the overall SPX roll gave the portfolio an extra credit of $0.65 which offsets the transaction costs and commissions.
After the adjustment, the P& L Chart looks like below. It still has a delta of -27, a bit higher due to the RUT positions.

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