By Derek Moore
New HiPOS Trade
Today with the market retracement and pop in volatility, ZEGA’s traders entered a short put spread that was added to the existing short call spread in HiPOS Conservative accounts.
The combination now of both sides of the trade create a short iron condor position. With the addition of the put side, we took in additional premium and created an opportunity to potentially make around another 1% for the accounts. The increased volatility allowed the short put spread to be added even though there are only 18 trading days left until expiration.
This is an example of how increased volatility enables us to get further out of the money on positions.
The HiPOS Graph
Above you see that we now have 2 separate purple curve lines above and below the S&P 500 Index price level.
These are areas should price move above or below, we may take a more defensive posture on the positions to further manage risk. Both sides of the short spread are reflected with the dotted 3400 level below and 4650 above the market. With a short iron condor position, you want the market to ideally do nothing but stay sideways.
Off course there is room in both directions to move so long as price doesn’t move too far too fast in either direction.
Below you’ll note the particulars. I’ve highlighted in bold things that are new or updated from our original trade entered August 11th.
We’ll be back with more updates over the next few weeks.
Now for the Particulars: (Updates Bolded)
- Index: S&P 500 Index
- Position type: Short Iron Condor Spread
- Short call strike: 4650
- Long call strike: 4700
- Call Spread Risk (prob. ITM): ~2.5% at time of entry
- Put Spread Risk (prob. ITM): ≈ <1% at time of entry
- Targeted total return: ~2.9%
- Distance Call Strike OTM: ≈9.7% at time of entry
- Distance Put Strike OTM: ≈ 17.8% at time of entry
- Expiration: September 16th, or 18 trading days until expiration