Iron Condor Adjustments to SPY & EBAY

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Iron condor: In tonight's video, I want to talk about just our two kinds of closing trades and hedge trades that we made here for today, Monday, March 16th. So we did make a closing trade. We actually kind of categorized it, or I categorized it really, as a hedge trade because we didn't close out the entire position, so I'll go over this position first. This is a SPY.

We did end up buying back our 208, 209 vertical calls spread that we had originally sold and the reason that we did this is that it was in jeopardy of going deep into the money and then creating a loss on this position.

So, although we would have liked to hold on to this thing a lot longer through the rest of the week and expiration, it's better to bank a nice profit in this SPY trade, assuming everything else expires worth this year then to be left with a loss of $57.00.

Now that's all we could lose is $57.00, and we're trying to get about a $200 or $250.00 gain on this type of trade, so we'll probably end up with definitely over a $100 profit on this thing, so we'll see where it ends up. But again, we closed out the SPY 208,209 vertical call spread.

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When we look at where the S&P is trading right now, again the reason we closed it out is because the market closed today at 208.02 so this is right at our short strike and so tomorrow or the next day as we head into expiration, if it closes anywhere higher than this really then it threatens our ability to turn a profit in this trade.

So by closing out that position today we're basically left with this very wide kind of iron condor that's left in the position and you can see there's probably tiny threat to this position on either end, the market's trading probably right in between here and we've definitely got some more time to gain left in these contracts they've got another 30 or 40 dollars to go before they actually end up expiring. So we've got another little bit of money that we can make this trade before expiration week.

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Now we also made an adjustment to our eBay trade. This is our iron condor that we had originally sold on eBay. Everything was going pretty well on eBay most of the month and again head toward this last week of expiration, the stock had started to move kind of against the position, we didn't want to see that, so what we ended up doing is selling another put spread below the market. The fifty-nine, fifty-seven and a half puts for a twenty-two cent credit.

And again, all this is trying to do is just recenter the trade over the market and take in a little bit of credit as eBay moves higher. Here's a look at where eBay is, and you can see that it started to move higher against our position, kind of all along here and it had a nice little kind of dip in the last couple of days.

We thought it would stay under our shore strikes which are currently at sixty, but it started to move against that position and, again, I just don't want it to have that opportunity for eBay to go much higher without taking on some hedge, to begin with, okay? So what we did here with eBay, and let me just go to the analyze chart here, is we sold the fifty-nine, fifty-seven and a half put.

So this was our original position in eBay, you can see how wide this original iron condor was, right, pretty wide, these aren't drawn to scale. But now eBay's threatening the top half of our iron condor, so it's trading right here where I drew this vertical line on the screen. So what we did here is we slid up, or rolled up, our top side, you can close out this position, it's practically worthless, so it probably costs more money to close it out than to roll it up.

We just decided to add a new position right at fifty-nine, fifty-seven and a half. So that creates a minuscule, tight and narrow iron condor right over where eBay's trading. So this is what the resulting position looks like and as you can see that one of the great features about this particular adjustment is that it did recenter the strategy over where eBay's trading right now.

So you can see this is where eBay closed today and we're pretty even as far as the distance between our break even points. They're much more narrow, but there are only two days to go until expiration so there's not too much room that eBay can move between now and expiration. By taking in this credit, we also increase our possibility that we do make a little more money on this trade to about $65.00 if everything expires worthless, which would be nice. We'd ideally like to see eBay trade and close between fifty-nine and sixty which can happen between now and expiration.

So as always, I hope you guys enjoy these videos. If you have any comments or questions, please add them right below. If you're watching this video somewhere else out there online on Youtube, you just have to understand that this video is sent out about fifteen to twenty days after it's sent out to our members. That means that you did not get these real-time alerts in this video that accompanies the alerts without signing up for a membership at 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.