Iron Condor Video Training Now On-line

Good news option traders!

I finally finished up my iron condor video training series. The whole video course is offered free of charge, thanks to the good guys that agreed to sponsor it. The videos cover the basics of the iron condor, gets deep into the greeks, discusses different ways of trading the positions, covers risk management, etc.

Iron Condor Video Training Series

Use the link above to click though to the site and if it sounds like something you're interested in just submit your name and e-mail at the bottom of the page. Once you confirm the subscription, you'll get access to the course.

Hey, you could be learning how to trade iron condors right now! Click through...

Christopher Smith
TheOptionClub.com

Iron Condor Option Strategy Webinar

I have trading iron condor and credit spread positions for years, now. During that period of time I have been sharing quite a bit about my experience and insight concerning this strategy, but no matter how much I do so there are always more people who want more.

There has been a bit of pressure to put together some form of presentation concerning iron condors and last year I decided that I would give into it. We have arranged for a sponsor and a complimentary webinar presentation that will be offered from time to time.

A free online report has been prepared, and if you're interested in what you see there you can sign up for our notification list. You will receive an educational MP3 presentation just for putting yourself on that list.

Iron Condor Option Strategy Report

So, take a little time and read the report. Get signed up on our notification list, enjoy the MP3 presentation, and then join us for one of the webinar presentations. The next one will be this coming Saturday, May 24th, at 9:00 a.m. PST.

Christopher Smith
TheOptionClub.com

Profits Of 18% In December?

We have seen a very difficult market for both traders and investors. The current market conditions have been highlighted by increased volatility. It has not been uncommon for us to see the Dow Jones Industrial Average up 100 points one day, and down a couple hundred in next.

Volatility can be an option traders best ally, however. That is precisely what allowed me to generate more than 18% and profits for the December expiration. Yesterday, I closed my December iron Condor and acting in a nice profit after watching the index thrash within its trading range.

Back on November 23 I opened a bear call spread at the $830 strike for credit of $.95. a few days later the market had sold off, allowing me to sell a bull put spread at the $660 strike for a credit on $.70. The Russell 2000 was then trading at 748, giving me a significant cushion on both the call and the put side of the trade. From that point forward I did nothing, but watch the market gyrations.

Yesterday, I began buying back the position and exited for a net debit of $.10. This left me with a profit or dollar 55 on a 10 point spread, with a maximum risk of $8.35. A profit of $1.55 on risk of $8.35 translates into an approximate return of 18.5%. What made this trade especially sweet was the fact that it required very little in the way of monitoring or managing during a period of time that many market participants were struggling.

What this demonstrates is that as and options trader you are able to take you to the attention of any market condition and turn it to your advantage. So, rather than fighting the market you find yourself in a position of simply identifying current conditions and adapting to them.

Good trading!

Christopher Smith
TheOptionClub.com

Iron Condor Option Trade on the SPX

An iron condor has been opened on the SPX, allowing for a +1 SD move in either direction. A credit of $1.25 has been received and an adjustment plan is in place.

The location of your strikes is not particularly important to your overall success on these trades. What makes a great options trader is their ability to manage risk. Establish a plan to adjust your position should the market reach a given price point. Be consistent.

Christopher Smith
TheOptionClub.com

Adjusting An Iron Condor Near Expiration

The market took back all of the ground it gave up on Wednesday, and now is hovering within 2 points of my adjustment trigger. A comment was posted to my last post questioning when I will close the spread and the short answer is when I can take my profit or am otherwise forced to do so by the market.

The put spread is ready to close. It is a 10 points spread and I have placed a limit order to close it for a .10 debit. That allows me to keep .50 of the original .60 points I opened it for. If filled, I am left with a bear call spread.

Being this close to to expiration with only 12 points of room between the short strike and the market is a worrisome place to be. The reason it is concerning is because the market, as it has shown us recently, is capable of making a 10 point or better move. A big upside move could really hurt a 10 points spread.

I am taking some of the potential sting out such an event by rolling the long 1,470 call down to 1,465. This will leave me with a 5 point spread, cutting my risk in half. It will cost me some of my credit, but at this point protecting against catastrophe is more important than maximizing profit potential on a credit spread.

Mind your risk, too!

Christopher Smith
TheOptionClub.com

Making Money When The Market Is Down!

Wahoo! A little selling on the S&P 500 is just what we needed!

With earnings season here, the expectation is for slower economic growth. Slower growth, plus there was a bigger than expected draw down in gasoline reserves and a smaller than expected build up in oil. There's talk of $4.00 per gallon gas at the pumps.

This was enough for stocks to start lower at the clang of the opening bell, pulling back after their recent gains. By 10:50 a.m. ET, the Nasdaq had fallen 0.7% and the S&P 500 had slipped 0.5%. NYSE volume was tracking about 3% higher and Nasdaq volume was tracking 2% higher.

The minutes from the March Federal Reserve meeting will be released at 2:00 p.m. ET. We'll see what, if any, difference that makes.

The iron condor position is unchanged. We have a bit more breathing room, but we're not yet out of the woods on this trade!


Christopher Smith
TheOptionClub.com

Earnings Season and an Iron Condor

Earnings season is here. Our iron condor is still open.

Theta is really biting into the spread, as there are only 9 days left until expiration. But, just a little more upside and I'll be forced to close the call side for a loss.

It's all a very interesting waiting game!

Obviously, I'd like to see the market soften up and trade lower. It's been meandering, which is fine but some selling would certainly be a welcome relief for our iron condor spread.

Win or lose, once it is closed, it will be time to tally the score card and look for the next one.

Christopher Smith
TheOptionClub.com

SPX Iron Condor Trading Update

Sunday is the time to review the prior week's market activity and re-assess our current SPX iron condor position. Friday was a wild wide for the major indexes, but they closed nearly unchanged.


Stocks gapped up at the open on strong readings for personal income and spending, manufacturing and construction also helped the early advance. China was then forced back into the picture, with the Commerce Department saying it would start imposing tariffs on some goods. This stirred trade concerns and the equity market dropped as much as 1% intra-day. Late in the day, for the second-straight session, the broad indexes found a second wind and recovered their lost ground. The S&P 500 pared its loss to 0.1%. The Nasdaq closed up 0.2% and the DJIA rose less than 0.1%. For the week, the Nasdaq and S&P 500 both shed 1.1%. The Dow and S&P 600 fell 1% each. The NYSE composite gave back 0.8%.

You will note that MarketClub has generated a sell signal for the SPX, which I saw tick in live that day. Since I am already in an iron condor, I did not open any new stock options position as a result. The erratic action makes for a difficult trading environment, and combined with higher volume across the board it is not a good sign for an early rally following the February 27th sell-off. The market rally has shown signs of weakness in the past few days.

My iron condor is still there and with continued sideways action it could turn out to be a good month. The bear call spread remains my primary concern. The delta of the iron condor position remains negative, so some further downside would be beneficial and would provide some additional cushion between the index and the short call of my bear call spread.

Christopher Smith
TheOptionClub.com

S&P 500 Iron Condor Update

This is a tough market to trade!

Yes, I am watching the market activity with particular interest. With my bear call spread feeling the heat from a fledgling rally, I have been particularly interested.

Some of the heat was taken off of my bear call spread today, with the S&P 500 seeing a distribution day. The index sank 0.8% on rising volume with the help of inflationary concerns and the Iranian government.

So, what's going to happen? I honestly do not know. I follow my rules. I trust my judgment when I don't have an open position.

The market remains in a confirmed rally. Today, March 28th, counts as a distribution day, but the rally is still intact. Whether it remains so, depends upon what happens in the days to come.

Christopher Smith
TheOptionClub.com

S&P 500 Iron Condor and a Potential 21% Profit...

Yesterday, we had another weak profit report by a home builder, Lennar (LEN), a sharply lower consumer confidence reading, and troubling oil prices. The S&P 500 and Dow industrials shed 0.6% each. The small-cap S&P 600 gave up 0.7%. This selling was on lighter volume, however.

The half-point drop in the S&P 500 was certainly a welcome event for my 1,460 - 1,470 bear call spread. During this consolidation I managed to open a 1,365 - 1,355 bull put spread, rolling into an iron condor for an additional 60 cents credit. That boosts the total credit to $1.80, providing now for a maximum return of $1.80 / ($10 - $1.80) = 21.9%.

The market has opened to the downside this morning. My position delta on the newly formed iron condor is negative, so some additional selling is not of great concern.

Mind your risk!

Christopher Smith
TheOptionClub.com

Credit Spread Trading and the SPX

Last week saw the SPX make a relatively large downward move on volume, with the market closing near its lows for the day. This occurred on Tuesday and suggested that further downward movement was in store.

The next day saw the further selling, with the SPX actually breaching the next Fibonacci level. That same day we had a reversal, on volume, with the market closing above the prior day's close and near its intra-day highs. A bullish sign.

So, where does that leave us?

The market remains in a bearish correction, but there has now been an attempted rally. That rally attempt began on Tuesday, with the intra-day reversal. The market must now follow through on volume if this attempted rally has hope of pushing to new highs.


Let's look at the bigger picture, however. What you see above is a long term, monthly chart of the S&P 500 dating back to before the current bull market began. From a long-term view we are still in an interim bearish trend, but is this correction nearing an end?

I sought confirmation of this from MarketClub's chart analysis software and stole an image capture of that analysis, which I have inserted below. What is nice about this analysis is that it is based on defined, objective criteria and the factors being considered are clearly identified.

The outlook remains decidedly bearish, which is consistent with our current directional bias. We have seen one day of buying on volume since the market sold off on February 27th, but one good day does not make for a market rally. Until we see evidence of further institutional buying you will want to be cautious of further potential downside.

Meanwhile, my 1,460 - 1,470 bear call spread remains safely out of trouble. I will continue looking for an opportunity to roll into an iron condor, but I am being rather cautious about this because I want to remain safely away from the market and I also want a healthy credit to justify the risk of selling a bullish spread. Patience and caution are my current watchwords.

Good trading!

Christopher Smith
TheOptionClub.com

Market Analysis for S&P Iron Condor

There was no post on Friday because I had an appointment that had me leaving the house early. I missed Friday's sell-off since I was without computer access until after market close. After assessing the accounts, I have one position that I will close on Monday but nothing major.

Sunday is usually the day I take some time to assess the week's market activity. My family and I usually have things planned on Saturday and we all need some time to decompress after a busy week. Sunday tends to be a bit quiet for us and I can take extra time to read and consider events.

The S&P 500, the overall market in fact, has been in a sustained bull market rally since July of 2006. The larger bull market trend dates back to March of 2003. Rallies and bull markets can last for significant periods of time, but nothing lasts forever. When you have a sustained rally, you need to start questioning whether it is due for a correction.

Friday's sell-off begs that very question. Is the S&P 500 poised for a correction? Well, of course no one knows the answer to that question with any certainty. Pundits on CNBC, cranks on Internet discussion boards, and many of the gurus will no doubt have their opinions. Nonetheless, not one of them knows with any degree of reliability as to whether this latest rally is ready to roll over.

Here is what I know, however. I know that we've been in a nice strong upward trend since breaking out last July. I know that eventually the market will correct at some point, changing its trend. That change in trend may be a sideways consolidation, but more likely it will involve a pull-back in price. I also know that when the market corrects it is then that my credit spread strategy is most likely to result in a loss or require a costly position adjustment.

Here are my current market opinions. These are opinions, not factual recitations. My opinion is that if the market corrects, I expect to see a pull-back to a price level in the range of 1,400 to 1,365. That's not to say that we'll see those levels in an immediate sell-off, and I would expect to see the market pause along the way at various levels of support. On the other hand, if the market continues in its trend I do not expect to see an acceleration taking the SPX outside of its current trend channel, absent a short-term climax run.

Those opinions are the basis upon which I will construct my next round of credit spreads. My goal will be to sell spreads at price levels that I believe have a low probability of being reached by the SPX between now and March expiration, while still producing an adequate credit to justify my risk.

I will have to wait until the market is open to truly assess option premiums, but based upon my preliminary analysis today I will be looking to sell a bull put spread and a bear call spread for a combined credit of $1.20 to $1.70. If I can accomplish that at appropriate strikes, we should have a good chance of adding to our year-to-date gains.

Good trading!

Christopher Smith
TheOptionClub.com

Call Spreads - Option Premium Analysis

With a nice, robust gain yesterday I could not but help to take a look at the SPX option chain to see what was available in the way of call spreads. Premiums were thin and in order to get a decent credit, I would have to move closer to the market than I was comfortable.

Remember. The primary profit engine behind our credit spread strategy is time decay. Our goal is to sell spreads where we think the market is not likely to go. If all goes well, those spreads will erode in value and will be closed out, or expire, allowing us to keep our credit.

If you sell you spreads too close to the action, you're likely to spend some tense moments in front of your computer watching the index. It can be exciting, but this strategy favors the dull passage of time.

So, a call spread was not sold. With the market giving up some of yesterday's gains it is time to return to the porch swing and watch the grass grow, or the paint dry, or whatever... Just so long as our put spread stays safely away from the money.

Iron Condor Trading on the SPX

An iron condor is simply a combination of a bullish and a bearish credit spread. This week I sold a bullish put spread and the market immediately traded away from it, moving higher.

If I sell a call spread above the market, I will not increase my total risk because only one spread can lose money at any given time. My broker recognizes this and will margin both credit spreads as one trade; i.e., an iron condor.

That's not all. Because I receive a credit for both the call spread and the put spread, the combined credit further offsets my risk. I received .70 for the bull spread spread. If I were to sell a call spread for .50, my total credit would be $1.20. On a 10 point spread, that reduced my risk to $8.80. Of course, with the increased credit you'll also see additional profits!

A large index like the S&P 500 is especially well suited to trading iron condors because it is less prone to erratic moves. So, if I can sell both the call spread and the put spread I like to do so.

SPX Credit Spread Filled

Our SPX credit spread has been filled. We sold the 1,375 put and bought the 1,365 put for a .70 credit. This is a 10 point spread. The total risk is 10 - .70 = 9.30. The maximum return (before commissions) is about 7.5%.

The delta of the 1,375 contract was about .13, which means that there is approximately a 87% probability of the contract expiring out-of-the-money. We will not allow that contract to go in-the-money and will adjust or close the position before the market reaches the strike of our short put option.

Our goal now is 1.) to sit patiently and allow theta to erode the value of the spread while guarding against an adverse market move, and 2.) look for an opportunity to sell a call spread that meets our criteria. Right now the market does not offer a sufficient credit for a spread at any level we would be willing to sell. The S&P 500 will need to move to higher price levels to make it possible.

Our analysis of potential call spreads will follow in subsequent posts.

Hunting an Iron Condor Options Trade for February

About midway through yesterday's trading day, I placed an order for the 1,370-1,380 bull put vertical credit spread. My limit order was placed at, or slightly above, the mark price in expectation that we might see some additional selling toward day's end. That selling did not materialize and the order was not filled.

With the market again soft today, I have renewed the order but shaved a dime off of the limit price. The mid-price on the spread has been trading at or slightly above my limit, so there is a chance for that order to fill. With earnings season around the corner, I am a little cautious and do not want to chase this trade by shaving anything more off of the order price.

The S&P 500 is consolidating, pulling back to its trend line and technical support. I have already identified the bear call spread I'm interested in opening but will wait to see if we get a bounce off of support. Once we see a decent up day I'll likely place the bear call spread order. If and when filled, that will complete the upper and lower wings of an iron condor position.

We will talk more about the position as it materializes and I will post updates here, so be sure to check back.

Good trading!

Christopher Smith
TheOptionClub.com

Iron Condor and Credit Spread Trading on the SPX

A recurring theme on our options trading discussion boards at TheOptionClub.com has been the topic of trading iron condor spreads and credit spreads on a major equity index such as the S&P 500. At various times over the past two years I have hosted a dedicated discussion board and have shared quarterly results of my personal trading. This year I plan to do something similar, here on Blogger.

At present, I maintain one open credit spread on the SPX cash index. The SPX tracks the S&P 500, which is commonly used as a bench mark for the health and vibrancy of the U.S. stock market. It is a weighted average, consisting of the 500 largest companies trading on U.S. exchanges. It's size, combined with the fact that many institutional traders utilize SPX options as market hedges, makes it an ideal choice for our particular style of trading.

I do not currently have specific parameters for this blog, but will allow it to develop on its own based upon feedback from readers. At a minimum, I hope this will be an exciting 12-month journey that brings both you and I new understandings and insights into how to minimize market risks in our portfolios, while achieving extraordinary profitability.

If you are not familiar with options trading, I encourage you to spend some time learning about these highly flexible financial tools. Their risk is over played, and with the proper education you can learn how to use them to actually limit risks in your accounts while also possibly enhancing profits from existing investments. There are a lot of companies that will offer to educate you, some are better than others.

To make your journey easier, I would like to offer you a free copy of the 2007 Stock Options Education Report. It will outline for you what you need to spend you time learning about and how to ferret out legitimate education providers from those others who will take your money but not satisfy your needs. Along with the guide, I will provide you with my stock options mini-course.

This should be fun! I'm looking forward to posting here over the next year and hope that you'll join me on a regular basis to share information, insights, and hard earned wisdom.

Christopher Smith
TheOptionClub.com