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Friday, November 20, 2015

Russell 2000 ETF (IWM) Iron Condor

10/1/2015 (12:58:12 pm, PT)  low stoch, high IV

buy +1 Nov 2015  $113 call (30% prob ITM)
sell  -1 Nov 2015  $111 call (39% prob ITM)
sell  -1 Nov 2015  $108 put (48% prob ITM)
buy +1 Nov 2015  $107 put (44% prob ITM)


  • net credit received:  $1.25 (or $125)
  • the call vertical is $2.00 wide
  • the put vertical is $1.00 wide
  • zero risk on the down side
  • $0.75 (or $75 risk on the up side)
  • this trade is more bearish than bullish
  • IWM was near $109 on 10/1

11/17/2015 (10:45:51 am, PT) (3 days before expiration)

  • buy back the call vertical for $1.76 (debit) to avoid losing the maximum ($75) on exp.
  • buy back the short $108 put for $0.04 (debit)
  • leave open the long $107 put in case IWM drops A LOT in the next 3 days (anything is possible, right?)

11/20/2015 (expiration)

IWM closed at $116.81

  • it's a good thing I bought back the call vertical on 11/17
  • the long $107 put expired worthless

TOTAL LOSS:  $55 (instead of $75 if I had held the entire trade until expiration)


When I entered the trade on 10/1/2015, I was more bearish than bullish.  
However, I also knew that there's always the probability that IWM could rally back up and go through my call strikes.  That's why I kept the risk under control by doing only 1 contract.

My goal was to buy back the entire iron condor at around $0.60 so I could walk away with a 50% profit.  However, I never had the opportunity because IWM started rising right after I placed my trade.

Looking back, I would say that this was a dumb trade.  I should have sold put options instead because the stochastics were in the oversold region and IV was VERY high.  Lesson learned!

Learn to SELL PUT OPTIONS by watching my videos HERE!