With SPX at $2659 +40 Points, I did an Iron Condor in the Mar 29 Expiration, 45 Days out. Sell 1 2830 Call, Buy 1 2840 Call, Sell 1 2370 Put, Buy 1 2360 Put. Total Credit $1.70, Maximum Risk and Capital allocated is $830. (Trade was discussed earlier today in a webinar with Ally Invest)
4 Step Risk Management Plan
#1 Set Up: Picked Short Strikes by Selling a 12 Delta in the Calls and Puts. Expiration is 45 Days out from Today.
#2 Profit Target and Max Loss. Looking to make 8% on Capital or risk of $830, that would be about $65 per every 1 Iron Condor. I would have an order in to buy back the spread at $1.05 Debit.
If the market goes against me, don’t want to lose more than 15% of the $830 Capital or about $125. So if the spread expanded to $2.95 from the initial $1.70 credit, would get out.
Why am I willing to lose 2X what I am hoping to make? I don’t want to lose more than I make, but to give the probabilities time to work, I have to give myself more room before I adjust.
Steps 3 and 4 talk about When to Adjust and How to Adjust, a little more advanced topic, so for this Iron Condor , I will keep this simple and just give a plan of where I would take a profit and where I would get out for a loss.
Note: Tomorrow at 11 am central starts a new 3 week class at Sheridan Mentoring: Trading Double Calendars in an Volatile Environment. This has been one of the most successful strategies in Sheridan Mentoring over the last 5 months, and we will spend the next 3 weeks discussing how to manage and trade this strategy in a more volatile environment. Go to Sheridanmentoring.com for more information. All classes are recorded and archived.