Monday, July 7, 2008
RUT: July Paper-Trade (Holding Pattern)
We did great in May and June posting over 100%+ returns on both of our Paper-Trades using a Tight Iron Condor. The conditions these last 2 weeks have not been good for an entry as the market has been anything BUT neutral which is much more favorable for that strategy. We WILL put together a July Paper-Trade, but we'll be watching for a reversal sign before we put on the position. Ideally we'd like to see some capitulation which would then give us a favorable probability of a bounce. Our strategy would be to sell a Tight July Iron Condor about 30 points above price level at capitulation and then let it bounce around that area for awhile as we watch the Theta burn. That could all change, but that's why we're in our current holding pattern.
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1 comment:
Most traders/investors shun 'tight' iron condors, preferring to go further OTM. The major argument favoring tight iron condors (IMHO) is that the maximum dollar loss is much less.
Still I find myself buying (sell call spread, sell put spread) iron condors that are a compromise between CTM (close to the money) and FOTM.
As a 30+ year professional options trader, I feel each trader must find iron condors that fit his/her personal comfort zone and that the risk/reward be acceptable to that trader.
Do you have any evidence that tight iron condors outperform further OTM ICs over the long term?
As PhD student, does my question fall under the research you are doing?
http://www.mdwoptions.com/options_for_rookies/
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