Tuesday 10 October 2017

ODAX November 2017 Iron Condor adjustment (IV)

Summary

Disaster mode, with the Call leg almost halfway to the point of reaching max losses. Unlike I said on the last adjustment, I could not pay attention to the markets last Monday, so I did not close the position when it reached the "in the money" level, and now it sits 150 points in the money.

As there is still time-value in the options, I am going to bet a pullback to the 12800 level (the previous resistance) while I rolled the Put leg further up (from 12000-11600 to 12450-12000). If I am wrong, the price to pay will be jeopardizing all the profits made this year and a couple of hundred of Euros more.
DAX on October 10th. Source Investing
The November 2017 12800 Call sits at 63 delta and the 13200 Call sits at 25 delta. Accounting the credit collected, break-even point is at 12910.

Trade status

I locked 61€ while I collected 146,5€ more. As you can see, these adjustments reduce very little the maximum loss figure.

TypeNameOpen DateDTESpotP/LMax Loss
Put SpreadODAX Nov 2017 11000/1060028/08/2017811212071,00 €N/A
Put SpreadODAX Nov 2017 11500/1110011/09/2017671240073,50 €N/A
Put SpreadODAX Nov 2017 12000/1160028/09/2017501270061,00 €N/A
Put SpreadODAX Nov 2017 12450/1200010/10/201738129501.949,50 €
Call SpreadODAX Nov 2017 12800/1320028/08/201781121201.449.50 €

Theoretical max loss and profit are now:

Max loss (downside): 2500,0 - (71,0 + 198,5 + 73,5 + 61 + 146,5)   = 1949,50€ (DAX < 12000)
Max loss (upside): 2000,0 - (71,0 + 198,5 + 73,5 + 61 + 146,5)   = 1449,50€ (DAX > 13200)
Max profit:  71,0 + 198,5 + 61 + 73,5 + 146,5  =  550,50€   (DAX between 12450 and 12800)

Regarding the December expiration cycle, I am unsure what to do as I do not want to accumulate further up risk with another Call Credit Spread and volatility is quite low for a Put Credit Spread. Moreover, a pullback is due soon (hopefully!).

See also

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