ODAX November 2017 Iron Condor adjustment (II)

Summary

DAX keeps climbing and the volatility is reaching year lows, so I bought a Dec 13600 Call option as a small hedge for further climbs. Also, if the market conditions are the proper ones, it will form the long leg of a possible December 13200-13600 call spread.

DAX on September 19th. Source Investing

By definition, there is very little chance for this option to gain value, but the low IV made it relatively cheap to buy and the November Iron Condor is being threatened on the call side.

Trade adjustments

There are still 61 days until the November expiration cycle end, if we reach the 13200 level before that point in time, this call option might be worth 2-3 times the money it took me to buy it.

This is a simulation depicting that scenario, on October 17th 2017:

13600 Dec Call simulated status on October 20th Source Position Simulator

The position simulator gives a value of 152€ if we reach 13200 by October 20th 2017 (the 30 days mark when I usually close the Iron Condors)

If we go, further into the future until November 17th 2017 (expiration day):

13600 Dec Call simulated status on November 17th Source Position Simulator

The value then would be only 72€. As you can see, the longer it takes to reach that level, the smaller the hedge. Of course, if the index climbs further 13200, the option will gain a lot in value, but that is highly unlikely.

So the current status of the position is the following:

Type	Name	Open Date	DTE	Spot	P/L
Put Spread	ODAX Nov 2017 11000/10600	28/08/2017	81	12120	71,00 €
Call Spread	ODAX Nov 2017 12800/13200	28/08/2017	81	12120
Put Spread	ODAX Nov 2017 11500/11100	11/09/2017	67	12400
Long Call	ODAX Dic 2017 13600	19/09/2017	87	12500

Theoretical max loss and profit are now:

Max loss (downside): 2000,0 + 50,0  - (71,0 + 198,5 + 133,5)   = 1647€     (DAX < 11100)
Max loss (upside): 2000,0 + 50,0 - (71,0 + 198,5 + 133,5 + 72) = 1575€     (DAX = 13200)
Max profit:  71,0 + 198,5 + 133,5 - 50,0   =  353€   (DAX between 11500 and 12800)

See also

• ODAX November 2017 Iron Condor adjustment (I)
• Options Industry Council: Position simulator
• 2017 trades (so far)

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