3/7/17 Rut Calendar
RUT is trading now at 1383. I would look to establish a calendar position by selling one March 24 exp 1380 put, and buying one Apr 7 exp 1380 put at around $7.00.
My profit target is 10% so I would enter an order to sell my calendar for $7.70
When do I adjust?
I will adjust when the price comes within a 5 point range of break even which would currently be 1355 on the downside and 1406 on the upside. Create another calendar with the midpoint 15 to 20 points away from where RUT is trading at that time, which would cut the position delta by 2/3 with the adjustment. I would then take off at a 10% gain or loss.
If you would like to learn more about calendars, take a look at a recent webinar that we did on calendars.
Today on Sheridan Mentoring TV, I put on a Live TSLA Pre-Earnings Calendar. Sheridan Mentoring TV airs Tuesday’s and Thursday’s at 1 pm central and I usually will put on a live trade every class and also explain and track every trade for educational purposes. TSLA at time of the trade was $228.46. Today’s trade I bought the Feb 10 expiration 230 Calls and sold the Jan 20 Expiration 230 calls for a debit of $5.60. The idea here is that Calendars have 2 risks, price and the Implied Volatility decreasing, and we are trying to eliminate Volatility risk. I do that by buying the expiration that will be affected by earnings and sell an expiration that will not be affected by earnings. I am looking to make around 10% for every 1 Calendar I buy, about $55 0r $60 (10% of $560). If TSLA breaks under 224 or 237 in next few days, I will instruct what to do in the blog. My short options expire in 10 days and my longs in 20 days. I will be out of this trade in 7 days, avoiding the price risk of earnings.
Tomorrow we launch our 1st online class of the year, How to manage a 10K Weekly’s Portfolio. This interactive class spans 4 weeks and meets twice per week. All classes are recorded. Sign up on the front page of Sheridan Mentoring and we will see you at 1 pm central tomorrow.
Dan Sheridan firstname.lastname@example.org
Can you do an Iron Condor when VIX is 13.5 and the SPX is 30 points away from the all time highs? Yes, it depends on how you structure and manage the trade. This is the trade I just put on for SOM TV with SPX around $2247. Sell 1 Feb 3 2315 Call and Buy 1 Feb 3 2325 Call. Sell 1 Feb 3 2150 Put and Buy 1 Feb 3 2140 Put. Total Credit $2.20 credit. The deltas of the short options were around 15. The goal on the trade is to make 10% and not lose more than 12% of the risk or margin of the trade, $780. If the delta of the short call or put gets to 23 this week. I will look to either buy a call on the upside or put on the downside to cut my position deltas 1/2 or 2/3. I sold the Credit Spread for $2.20 credit, if it goes to around $1.40, I would buy back the Iron Condor for $1.40 debit, making around 10% on my capital.
Join us tomorrow, January 4, for a free webinar at 1 pm central titled: How to Manage a $10K Weekly Portfolio. Sign up on the Sheridan Mentoring home page.