[Opening April Condor on SPY]
Dear Member:
The market volatility has eased off a little and for the moment, at least, things seem to be tending more sideways than in the recent days of wild gyrations. In this atmosphere, I am placing an order to open an iron condor for a credit on SPY. The order I am placing is for a credit limit of 31 cents for simultaneously entering the following positions:
Buy to open Apr 141 calls on SPY (SFBDK)
Sell to open Apr 140 calls on SPY (SFBDJ)
Sell to open Apr 125 puts on SPY (SPYPU)
Buy to open Apr 124 puts on SPY (SPYPT)
All together for a credit limit of $0.31
If filled, the potential return on risk would be 44.9% for a 3 week trade. As long as SPY is between 125 and 140 at expiration, and no adjustments have to be made in the interim, the complete credit can be enjoyed. Note that the call spread legs are only $1 apart as are the put spread legs. The maximum risk without adjustment is $1 per share less the credit taken in since, at worst, only one side of the condor (the call spread or the put spread) could possibly be a loser at expiration. Dividing the 31 cent credit by the 69 cent risk gives the potential return on risk before commissions.
DISCLOSURE: I have a calendar spread on SPY where I am long the Dec 140 calls and short the Apr 139 calls. Otherwise, I have no other current positions in SPY or its options.
Sincerely,
Bill Kraft
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