Saturday, June 20, 2015

FXE Jul 17' - Iron Condor

Jun 18

Opening Position

FXE has high IVR. The index has been trading sideways for a while now after hitting its lows a few weeks ago. 

To take advantage of the high implied volatility, I am buying a 1pt wide iron condor for 0.48/c credit (selling both put spread and call spread)

This is consistent with the credit being 1/2 the width of the strikes.

-1/c Jul 17' 110-109 Put spread
-1/c Jul 17' 114-115 Call spread

Net credit 0.48/c
/END

Jul 7

Analysis

With FXE below short 110 strike and the long 109 strike, I am looking to adjust the untested short call side and bring it closer collecting more credits.

Trade

The short Jul 17' 114 call is worthless. I am going to buy this back and sell the Jul 17' 110 Call for an additional credit of 0.23/c

The structure is now an unbalanced iron butterfly with the strikes at 109-110 110 - 115

The net credit on the trade is 0.48/c (original) + 0.23/c (roll) = 0.71/c. 

However the max risk has increased to 430 due to the short call spread side being 5pts wide. I will need to watch for an adjustment here, possibly rolling out in time or rolling up the wing portion of the trade.
/END

Jul 13

Analysis

FXE is dropping while the overall market rallies. It is trading at around 108 near the market close. To manage risk in this position, I need to close up the short call spread. I want to get the risk back to a 1pt wide strike and if possible pick up a little more credit. To do so, I am going to sell the 108.5 - 109.5 call spread and purchase back the short 110 call for a net credit.

Trade

- 1/c 108.5 Jul 17' Call (sold new call spread)

+1/c 109.5 Jul 17' Call

+1/c 110.0 Jul 17' Call (close short position)

Net Credit of 0.15/c

Total credit collected on this trade


0.48/c (original) + 0.23/c (1st roll down) + 0.15/c (2nd roll down) = 0.86/c

The new position has 1pt of total risk and has a inverted structure:


-1/c Jul 17' 110-109 Put Spread
-1/c Jul 17' 108.5 - 109.5 Call Spread

The short put spread is almost completely in the money and will have a loss of 1.00 should FXE stay below 109 by expiration. The call spread expires worthless (0.00) should FXE stay below 108.5

The maximum loss on this trade without further adjustments is 0.14/c plus commissions - nearly a scratch should price remain 108.50. Expiration is in 5 days.
/END

Jul 17

Analysis

FXE closed at 106.35. The short call spread expired worthless (0.0) and the short put spread expired at maximum loss (1.00). Trade is closed for a net 0.14 loss.

/END


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