CMG Iron Condor (LIVE Closing Trade)

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Iron condor: In this video, we’re going to try to close out of our CMG which is Chipotle iron condor that we entered into a little while back. We entered this back on in February. Now that it's the end of March, this thing has come in, these iron condors take a little bit longer because we’ve got a lot of options on both sides, but we traded this nice big wide iron condor in CMG back on February 22nd, and again, it's now started to come in and has now begun to reach our profit zone.

We’ve had a hold on it for about a month now, but we originally sold each of these iron condors for $125. They’re now worth about $52 apiece, so we’re looking at a profit right now of about $145 on this particular trade. Right now, the profit target that we usually have for iron condors is 50% of max profit.

When we sell something for $125 that’s an iron condor, we usually like to take the trade off around 50% of max profit. That’d be around $62 or so. And you can see today; we’ve made a good chunk of change because the stock has moved up a little bit and the value of the options have decayed. We’ve made about $70 today. About half of our gain came from just today's action.

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And now that we have CMG’s chart up, you can see here that when we entered this trade back on 2/22, it was right about here after Chipotle had made a pretty good move higher where I’m drawing that red dot on the screen. And pretty much, the stock has moved down against our position, so it’s not the ideal situation, we love to see the stock stay range bound and neutral with an iron condor, but we have seen the stock move down.

What's helped out though is that implied volatility has just faded a little bit lower from our initial entry point. And then also, we’ve gotten a lot of time decay. We’ve made most of our money in this trade on just the pure time decay of this contract, time passing by, and the value of the options decaying, and the stock not moving as far as it was expected to move which we know is historically a huge edge for us as traders.

We haven't got too much of our money made from the implied volatility move. Obviously, if implied volatility had dropped quicker or faster or further, that would've brought this option in a little bit sooner than right now.

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At the time that we’re doing this video, you can see this is all live, real-time trading. It's now up to about $55, still within our profit window, so we’re going to go ahead and right-click on the entire order, we’re going to go over to create a closing order.

And since the mark right now is at $55, we’re going to try to close this thing right at the $55 price tag. And you can see it got filled right away. We are now out of CMG. It took in about $140 on potential profit in that trade.

A good little trade, it took a little while to come in, but a small trade, nice little profit to round out the day here. As always, I hope you guys enjoy these videos. If you have any comments or questions, please ask them right below. And until next time, happy trading!

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.