Trade Details & Summary

SLV Iron Condor (LIVE Closing Trade)

Back again today to close this short iron condor by only removing the inside legs and leaving the long OTM options to expiration worthless for an overall profit of nearly $300 on the trade.

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  • I would normally close the entire position if we are far out from expiration.

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In this video update, we're going to go through all of the trades that we made on Tuesday, June 14th. Today was a little bit of a weird day in the sense that the markets were pretty much down most of the day and then kind of rallied really strong back into the close.

At the end of the day, it was just a big tug of war as we get closer to the Feds announcement. We all know they're going to keep rates the same, and they're blaming the Brexit stuff and all the stuff overseas, but they're going to keep rates the same. They're not going to raise rates.

They're probably not going to lower rates. It's just going to be looking at the comments that come out of the Fed. But, as a result of the early morning activity that we saw, a lot of implied volatility's now coming back into the market. That's a good thing like we talked about last night.

Our goal is to start building some positions across the board. We start slowly doing this is multiple areas. Start working down your list of highest implied volatility stocks to lowest.

Today we got into two new trades. The first one that we got into is SLV which is a straddle. This is a trade that I mentioned last time that we tried to get into for about 115; we ended up getting into it for about 112 for each of these straddles. We did a grouping of three like we've done before in the past.

If you're new to Option Alpha, I encourage you to watch some of the older videos; I believe the playlist link is right here on this page, just in the bottom right-hand corner of the screen.

Go back to some of old SLV positions that we did because we did a series of three straddles before that all worked out really well and now we're going to try and do virtually the same thing where we do these trades in groupings of three just as a means to leg into them or spread our entry out over time.

We don't want to put ten contracts in at one time, we want to do three today, and then three maybe next week, and then three the week after.

In this case with SLV, we did the 16 and a half calls and puts. We sold the 16 and a half calls, sold the 16 and a half puts. We also, as always if you're trading a risk defined account, always put in the trade comments some commentary about what you need to do if you wanted to create an iron butterfly out of this.

Which is going to go out and buy the additionally 14 and a half puts and buy the 18 and a half calls above the market. Now in this case, based on where I break even point, it gives us about 68% chance of winning. Implied volatility rank around 61.

We don't usually do a straddle at implied volatility at this level but, since we've got a lot of capital to start outlaying, we're very under allocated in our positions because we're waiting for higher implied volatility which is just starting to come back in. I feel like we can do this and the margin requirement on SLV isn't that high.

This is where SLV is. You can see the huge jump in implied volatility. And this is what we played last time. We played the last drop in implied volatility, and we're hoping for another drop in implied volatility as we get through July and August.

But again, what we're doing here is just basically centering this trade right at 16 and a half. We're doing it right at the money and giving us $1.12 break even point which moves us out further on either end. That gives us a nice wide base here for this SLV straddle. Here's our payoff diagram.

You can see what it looks like, very nice wide straddle base. Again we're just looking for this to be the first entry point here for SLV. If SLV moves higher, we'll maybe do the 17 straddles, or the 17 and a half's later on, but right now we're just going to enter this set.

The other trade that we got into today, later on in the afternoon, was FXY. This is one that we haven't traded in a while because volatility has been pretty low, but recently spiked up, and with probably all this Brexit stuff a lot of volatility is coming into the currency markets.

So Implied volatility is at the 63rd rank right now which is good. We went ahead and did a credit spread this time, so we went a little bit directional, and we sold a put credit spread which gives us a bullish outlook on the stock.

Now at the time that we made this trade, I want to go back in here and show you kind of where we're sitting at with FXY. This is FXY again recently jumping up in volatility. The stock, or the ETF, is moving higher.

Stock right now is trading at 91.36 and so what we did is we sold the credit spread down below that level. If we go into the trade tab here, you can see the stock trading at 91.16, and we sold the 93rd ... 90.89 credit spread.

Now we took in a pretty decent credit to do this, and that was why we did it because we wanted to take in a pretty decent credit. It's about the 38% chance of being in the money. That's about the percentage of the width of the strikes that we want to take in.

Fair pricing when we were making this trade was about $35 per spread, and that's what we ended up taking in for this spread, so that's good. We received enough credit to compensate us for the risk in this trade. $35 per credit, which means that we had to scale up a little bit to make it worth it.

At the end of the day, this trade has about a 65%, 67% chance of success depending on where your break-even point is. Really good trade, I liked this trade. I didn't want to do something on the call side because of the call side volt ...

Liquidity out at this level wasn't too good. There's just not too much liquidity out at the further strikes to do an iron condor or strangle. Although I would have liked to do this a little bit more neutral, there just wasn't too much liquidity in the further out strikes.

On the put side, there was a lot more liquidity across the board. At least right now, and so we'll see what happens. That's the reason why I chose to go with the put side. Who knows a lot of this may be and probably is, a lot of Option Alpha traders right here getting into this trade.

Those are the two trades that we made today. As always we'll keep you guys updated with what we're doing if we make any adjustments or closing trades. If you have any comments or questions at all, please ask them in the comments section right below, and until next time, happy trading.

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