[Opening Iron Condor on Russell 2000 (RUT)]
Dear Member:
With the Russell 2000 trading about midway between a support and a resistance, I am placing an order to open an April iron condor. As you may recall, this is a four-legged position consisting of a bear call spread and a bull put spread that is opened with a credit. The attempt is then made to keep all or as much as the credit as possible. As long as the index remains between the short put and the short call legs, there is nothing to do and if the index expires between those levels, all the initial credit is kept. At worst, only one side of the spread can lose assuming no adjustment(s) has been made.
The order I am placing is to simultaneously do the following:
Buy to open the Apr 620 puts (RUYPD)
Sell to open the Apr 630 puts (RUYPF)
Sell to open the Apr 740 calls (RUYDH)
Buy to open the Apr 750 calls (RUYDJ)
All for a credit limit of $2.90.
If filled, the credit would be $2.90 per share and the risk $7.10 per share for a potential return on risk of 40.8% in a month if the index stays between 630 and 740 at expiration and no adjustments are made.
DISCLOSURE: At the time of publication, I have no position in the referenced options.
Sincerely,
Bill Kraft
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