As I planned on Friday, this morning I closed the rest of my December RUT iron condor position for a total profit of 86c per original contract. I opened the December position on 6 October, so that means I had just about an 8% return on initial margin over the past month. By normal investing standards, that's an amazing return, but let's put this in context: the same strategy lost 7% on its November position and just under 2% on its October position. To a normal buy & hold investor, this is pretty frightening levels of risk; to a professional in the futures industry that plays poker and trades options on the side, 8% in a month is bordering on boring. All a matter of perspective.
On 15 October, I made a pretty big delta adjustment by buying a 760 call. The original call spread was 770/780, so this is what is known as a "mouse-ear" adjustment. This is one of the most expensive adjustments that can be made, but also one of the most effective. I feel like given the market action during that time I should have taken a less extreme approach, but after the prior two losing months I was a little gun-shy. Despite leaving some profit on the table by solving a minor problem with a big hammer, my confidence definitely benefited from a nice smooth month of price action resulting in a near-target profit.
I also opened a January 2011 position (650/660/810/820) this morning, although with implied volatility as low as it is I don't feel that great about the price I managed to get for it: only a 2.90 credit. This is a little on the low side, and that reflects the low VIX environment that we're in. I probably should have waited until VIX popped back up some, but this puts me into unfamiliar territory: I know that a good price during this time-frame is about 3.50, but I'm not quite sure what a good price is a week or more from now. Rather than sail into unfamiliar waters, I chose to limit my profits over the next month or so. I'm not sure that was a great decision, but I will persevere.
This is why we paper-trade.
By the way, if anyone tells you how easy it is to make money with Iron Condors, don't believe them - and definitely don't give them any money to manage. It is a very difficult strategy that takes a lot of creativity and experience to manage effectively. I'm certainly not an expert, and it might be tempting to discount my assertions of how difficult it is; but clearing companies' databases are littered with busted accounts that jumped into the trade without an appreciation for its subtlety and dangers. I am determined to learn this trade and how to profit with it, and to succeed where so many others have failed.
Speaking of boring trades, CS|MACO is still dead-locked flat as CS is screaming short and MACO is screaming long. Remember I said a trending market is not CS|MACO's friend? Yeah. The other boring one is the trade I wrote up in Collaboration is Good, which apparently I haven't named - let's call it CiG. No trades in 10-year note futures there, either, so I think I'll start running it in S&P and Eurodollar futures also. I ran back through the chart for the last couple of weeks, and it wouldn't have traded anyway, so I haven't missed anything.
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