Saturday, April 20, 2013

Update of my option trades - IWM Double Calendar and SPY Iron Condor

Dear fellow options traders,

Updates for the option positions established on 15/3/13 :

On 15/3/13, I've sold 5 contracts of SPY Iron Condor. Capital outlay = $625. Possible credit = $375.

On 1/4/13, the limit order to buy back the SPY Apr13 151/149 at $0.10 put spread was activated.

What's remained was to wait for the limit order for the SPY Apr13 158/160 call spread to be triggered. But by 13/4/13, which was 2 days before expiration, the limit order was still not activated. I thus have to buy back the SPY Apr13 158/160 call spread at a loss of $14 per contract.

Thus, the total loss for the SPY Iron Condor position was actual breakeven but I've incurred $60 for the commissions for setting up the positions and closing the positions.

Update for the 5 contracts of IWM Double Calendar bought on 15/3/13, where capital outlay = $695. Possible credit = $480.

This was another painful lesson learned. When the price of the IWM was moving down from 12/4/13, I've set up the limit orders to sell my adjusted double calendar position established on 4/4/13 and my initial double calendar position that was established on 15/3/13.

The limit order for the adjusted double calendar position was activated but the limit order for the initial one was not.

The significant lesson learned was, the initial IWM double calendar position was in profit with at least $200 on 12/4/13, I should have just closed out the position quickly instead of depending on the limit order to do the job.

What ensued was that I watched the IWM price tumbled from 93 to 89 from 10/4/13 to 18/4/13 and my initial IWM double calendar position turned from a profitable position to a loss of more than $200.

Thus, on expiration day, I bought back my initial IWM position, for a total loss of $310 plus $100 commissions.

Lesson learned from this IWM double calendar position :

When you have registered a profit about a week or a few days before expiration, close the position. Do it manually if you have to. Don't rely too much on the limit order if you want to close out a position quickly.

The other lesson learned was, HOPE is a dirty word in trading. When your position has crossed your tolerable sell out price point, close the position at a smaller loss. Don't hope for the position to turn around, especially when there is insufficient time at your side (ie. days within expiration date).

Yours Truly,

Tony Chai