Losing But Not Drowning
To review: the 7450/7550,7100/7000 short iron condor has just been losing value. Volatility has limply hovered around the lower reaches https://www.google.co.uk/finance?q=INDEXEURO%3AVFTSE&ei=yt6JWPnaKI-UUp_hivAB
The call spread in our trade is effectively worthless, the put spread worth about 23. With an opening price of 32 it seems this was better traded as a regular iron condor –selling both spreads.
Trade Repair
There are many strategies to mitigate losses. This may mean additional risk, by selling more options. Like selling the 7350 call for a credit of 6.5 and you could sell 6900 put for 13.5. This is by no means an ideal solution but it would reduce costs. Our margin would increase. We now have risk at 7350(capped though by our long 7450call, and risk at 6800-we are short the 6900put but we OWN the 7100/7000 put spread which would be worth 100 if FTSE falls that low).
Losing Should Not Be a Drama, But An Acceptable Loss
Each to their own with trade repair but with options we are not smashed to bits by the vagaries of the market. We step back and re-evaluate our positions. Stick or twist? We are not punters at a casino,we make considered decisions keeping time and reason on our side. I don’t know if the above suggested repair is of great value. I have not fully considered all inputs and this is not a recommendation. There is an army of people who trade ‘ iron condors’ and consequently take premium out of the market every month. Remember I bought those spreads, the regular ‘iron condor’ would have been a sale of the 2 spreads for 32 -now trading at about 25. Margin is limited so return on capital employed can be excellent. I used to look for a credit of at least 17 when risking 50 point spreads. CAVEAT: I got killed on my first iron condor in 2010.
