Tuesday, January 22, 2013

Iron condor trade adjustments to keep portfolio non-directional

With 23 days to SPX Feb option expiration, the SPX position P&L chart showed its price reached the adjustment point, since the market continued to push higher. Because the market has not pulled back for a while, I expected it to have a good chance to do that. So I decided to adjust only for the offending IC portion of the SPX positions.
To keep a similar profit potential, I had to increase the position size a bit. When playing with the 20 point wide and 10 point wide IC's of SPX on each side, I realized that the 10 point wide IC offered higher ROM (3.10/10=31% vs 5.15/20=26%). So I sold more 10 point wide IC on each side and closed the offending IC. In reality, it took a while to get the offending IC to be filled at 10 cents higher than the mid price of the IC.
The adjusted portfolio still have relatively high negative Delta, indicating the bias to a market pullback for it to become more profitable.

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