NDX Look Back Iron Condor

NDX – 6/17/2016

On 6/17 I decided to place an Iron Condor on NDX while it was trading at $4,371.20. Little did I know at the time this would become a nightmare trade for me. Most of the time when you have to defend an Iron Condor it is on the Put side which is usually easier to do because you can normally get better premiums on Puts and ranges further away. When you have to defend the Call side you do not get that luxury. That is normally not to bad, you just roll the Call to another month but on this trade NDX kept surging up with the rest of the market and left me scrambling for ways to keep this position profitable without increasing risk too much. I was lucky because I started this trade with only 1 contract because I had other positions open and I knew the Britain Euro vote was coming up. If I had started with more contracts I might have either had to close this at a loss at some point or sell off other positions to clear up margin. This is also the first time I ever had to defend my Calls multiple times in an Iron Condor.

You will notice in this trade that I increased contacts, rolled my Puts to bring in premium to offset losses on the Call side, increased the range on my Puts at one point instead of increasing the number of contracts and rolled to other months. In short, I did about everything you can do except close for a loss in my defense of this iron condor which makes it a good one to study.

This trade started on 6/17 with me placing a complete Iron Condor order using the AUG16 4700 and 4725 Calls and the 3800/3775 Puts. I put in an order for a $4.50 credit which was filled. That brought in a credit of $437.97 on an initial risk of $2,062.03 ($2500 – $437.97) which would have been a return of 21%. That was my initial mistake on this trade. I did not follow my own Iron Condor trading rules. I should have extended my range and shot for closer to a $3.00 credit. Even I still get greedy.

By 7/20 I was in trouble. Actually the warning signs started before then but I was hoping the market would move down since I only had about 30 days left on the AUG Calls. On 7/20 I made my first defensive move and rolled my 4700/4725 Calls up to 4775/4800 by doubling my Calls from one to two in order to stay in August. Nine days later on 7/29 the market had shot up again and I was forced to roll my 4775/4800 Calls to 4800/4825 by doubling them again to four contracts. Now my risk was about $9,600.00.

On 7/29 I also decided to roll my Puts up from 3800/3775 to 4475/4425 in order to bring in some additional premium. I also increased my range from 25 to 50 on these. I doubted the market would be going down and decided to increase the range instead of number of contracts. I also sold a second 4475/4425 Put on a separate trade after I rolled my first Put contracts. This gave me four outstanding Call contracts at a 25 range and two outstanding Put contracts at a 50 range.

On 8/5 my Calls were in trouble again and I did not want to increase risk anymore. Even if I had wanted to because of how little time was left on the AUG16 options it would have been hard to do. I decided to go ahead and roll my four 4825/4900 AUG16 calls to 4900/4925 SEP16 Calls. I was able to roll them up without increasing risk more by selling time. On 8/24 my 4475/4425 Puts expired worthless for I sold 4575/4550 SEP16 Puts to bring in some more premium.

On 9/8 I was finally able to exit this trade by closing all my position. At the end of August I had the potential to make $711.73 even after all my moves, but when I have to adjust I want out! I was able to give up about half of that to close the trade early and still keep $318.05 for a 3.419% return on 83 days. In truth I would have been ecstatic to have walked away at $0.00 by the end of July so making a little bit was a blessing.

Even if I had traded this correctly when I entered the trade I still would have had to adjust on this one. Sudden major market moves can really cause problems in Iron Condors. Especially if they are up moves when it comes to adjustment premium. The only good thing about an up move is you can typically wait a little longer for a pull back. In a market crash you sometimes wonder if it will ever end.

Date Exp Strike Price Contracts Type Total Balance Underlying $
06/17/16 STO AUG16 4700 $10.95 1 C $1,091.98 $1,091.98 $4,371.00
06/17/16 BTO AUG16 4725 -$8.15 1 C -$818.01 $273.97 $4,371.00
06/17/16 STO AUG16 3800 $25.70 1 P $2,566.99 $2,840.96 $4,371.00
06/17/16 BTO AUG16 3775 -$24.00 1 P -$2,402.99 $437.97 $4,371.00
07/20/16 BTC AUG16 4700 -$42.52 1 C -$4,254.27 -$3,816.30 $4,657.00
07/20/16 STC AUG16 4725 $32.04 1 C $3,201.74 -$614.56 $4,657.00
07/20/16 STO AUG16 4775 $17.05 2 C $3,405.47 $2,790.91 $4,657.00
07/20/16 BTO AUG16 4800 -$12.15 2 C -$2,434.53 $356.38 $4,657.00
07/29/16 BTC AUG16 4775 -$28.24 2 C -$5,651.05 -$5,294.67 $4,734.00
07/29/16 STC AUG16 4800 $18.96 2 C $3,788.96 -$1,505.71 $4,734.00
07/29/16 STO AUG16 4825 $12.54 4 C $5,009.93 $3,504.22 $4,734.00
07/29/16 BTO AUG16 4850 -$7.90 4 C -$3,166.07 $338.15 $4,734.00
07/29/16 BTO AUG16 4425 -$5.60 1 P -$565.25 -$227.10 $4,734.00
07/29/16 STO AUG16 4475 $7.56 1 P $750.76 $523.66 $4,734.00
07/29/16 BTC AUG16 3800 -$0.59 1 P -$62.02 $461.64 $4,734.00
07/29/16 STC AUG16 3775 $0.54 1 P $50.99 $512.63 $4,734.00
07/29/16 STO AUG16 4475 $7.52 1 P $748.99 $1,261.62 $4,734.00
07/29/16 BTO AUG16 4425 -$5.62 1 P -$564.99 $696.63 $4,734.00
08/05/16 BTC AUG16 4825 -$18.85 4 C -$7,545.34 -$6,848.71 $4,792.00
08/05/16 STC AUG16 4850 $11.10 4 C $4,434.67 -$2,414.04 $4,792.00
08/05/16 STO SEP16 4900 $26.03 4 C $10,406.67 $7,992.63 $4,792.00
08/05/16 BTO SEP16 4925 -$19.28 4 C -$7,717.31 $275.32 $4,792.00
08/24/16 BTO SEP16 4550 -$9.90 3 P -$2,976.80 -$2,701.48 $4,790.00
08/24/16 STO SEP16 4575 $11.40 3 P $3,413.21 $711.73 $4,790.00
09/08/16 BTC SEP16 4900 -$1.08 1 C -$113.25 $598.48 $4,803.00
09/08/16 STC SEP16 4925 $0.43 1 C $37.76 $636.24 $4,803.00
09/08/16 BTC SEP16 4900 -$1.07 3 C -$327.56 $308.68 $4,798.00
09/08/16 STC SEP16 4925 $0.40 3 C $119.45 $423.13 $4,798.00
09/08/16 STC SEP16 4550 $1.63 3 P $480.45 $908.58 $4,798.00
09/08/16 BTC SEP16 4575 -$1.96 3 P -$590.53 $318.05 $4,798.00

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