WOW! Thanks so much for all your replies!
Chris,
I actually thought I would put on the trade (paper) for the reason that I was kinda throwing myself into the frying pan and into a trade that would be very difficult to maintain given recent volatility. I figured that it was probably a good way to learn rather than in an underlying that required no maintanance. As a side note, I definately wouldn't have put this trade on for "real" money just yet.
As far as the theta I believe it was about +140 when I entered the trade. I felt that this high Theta would pull the P+L back to positive as time went by as long as the underlying remained in deignated range. The software I am using to do the analysis is Optionvue.
As of today my P+L actually shows me at breakeven! Although my Delta in my short call is 30, so I think its time to adjust. The total positoions delta is -51. I will adjust this postion probably by buying deltas ( Maybe +1 590 DEC Call for $28.50 +53 deltas or just add 2 to the 630 dec calls to bring total to 12) to bring me back to delta neutral, but they seem expensive.
Once again, thanks for all the replies.
Kevin
--- In OptionClub@yahoogro
>
> Kevin,
>
> Paper trading iron condors is a good way to learn about many of the
> pitfalls that exist for those who trade them. You sold a Dec.
> 490-500-620-
> now wondering why that position now has experienced an unrealized loss
> when the market is still between the short strikes of your position and
> nicely centered on your expiration risk graph.
>
> The expiration risk graph is a reflection of your position's value at
> expiration, and since there are still more than 30 days until those
> December contracts expire your risk graph is not an accurate depiction
> of the current value of your position's value. Now, you're looking at
> the greeks for that position trying understand what they are telling
> you. That's good. So, here's what's happened from a greeks
> perspective.
>
> When you opened the position everything was likely nicely centered and
> looked just great. That's how most iron condors start. Each of your
> short options had a similar delta and the long options had a slightly
> lower delta, since they were both a bit further away from the money that
> the short contracts. As the RUT began moving higher towards 580, gamma
> caused the negative deltas in the short call option to grow faster than
> the long deltas in either the more distant long call or those in the
> short put option. This has given your overall position a that negative
> delta, which tells you that if the RUT were to trade a lower it would
> help your position out a bit.
>
> Now, I'm not sure when you put the trade on. We have seen implied
> volatilities move higher with the recent market correction, however.
> Iron condors are negative vega trades, so if the vols increased after
> you opened this trade that will also create an unrealized loss in the
> position.
>
> I think you need to take another look at your theta, though. Your
> position theta should be positive while the market is between the short
> strikes. This reflects the idea that your position is gaining value
> from the passage of time.
>
> In general, iron condors are all about probabilities. They can be sold
> so as to give the trader a high probability of success. That high
> probability of success comes at a price, however. The price is that the
> potential downside of the trade outweighs the maximum potential profit
> significantly. Many iron condor traders have made profits on these
> trades month after month, only to see all of those profits and then some
> wiped out from one big loss on one trade.
>
> Those of us who trade iron condors for the long haul have to learn how
> to manage the positions so that we don't experience those overwhelming
> losses. There are different ways of doing this, but the primary concept
> is that you do not want to allow the position to take you into the red
> more than a predetermined amount. So, in your case we might draw a
> "line in the sand" by saying that we do not want to lose much more than
> our initial credit of $2,300. Let's just pick $2,500, and say we won't
> lose more than that.
>
> We then need to have plan to curtail losses once the market starts
> moving after the position is opened. Some guys like to roll the
> vertical spreads away from the oncoming market, some like to dynamically
> hedge by adding or subtracting deltas, some like to layer positions one
> on top of the other. There is not "right" way or "better way," it's
> just a question of finding the techniques that make sense for you and
> applying them in a reasonable and effective manner to prevent yourself
> from getting hammered during those couple months each year when the
> market seems to decide that iron condor traders have had it much too
> easy and need to give back some of the profits they've been pulling in
> the other ten months out of the year.
>
> So, what you've been watching in your position is the fact that after
> you opened your position the RUT began moving. When the position's
> value is effected by movement in the underlying in excess of positive
> effects of theta decay, you'll see an unrealized loss. Some of this is
> to be expected and tolerated because we can't stop the market from
> moving and the position does carry a high probability of success. At
> some point we need to basically step in say "enough is enough" by
> applying some form of position adjustment, hedge, etc., so as to prevent
> the market from dealing us a devastating blow. Avoid the devastation,
> you'll be around to enjoy those months when things work out in our
> favor.
>
> Christopher Smith
> TheOptionClub.
>
> --- In OptionClub@yahoogro
> wrote:
> >
> > Hi,
> > I am very new to Iron condors. I put on a paper trade so I could "mess
> around" with adjustments etc The position I put on is.
> >
> > + 10 ^RUT DEC 490 PUT = $7.5
> > - 10 ^RUT DEC 500 PUT = $8.7
> > - 10 ^RUT DEC 620 CALL = $4.5
> > + 10 ^RUT DEC 630 CALL = $3.4 TOTAL CREDIT = $2300
> > RUT 562 at time of condor
> >
> > After several days and RUT at 580 i see that at this point, although
> still nicely between my short options prices (althought 22 delta on the
> short put) it shows me as being down net $1700 and I'm confused to the
> reason why. Withing my graph if it were to expire now it will be a
> profitable trade. On this note I do notice that my theta is -137. Still
> total delta on the Condor is -37
> >
> > Any help would be appreciated.
> >
> > Kevin
> >
>
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