It's trading at a credit because of the (extended) width of the body to the outside wing. You would need to maintain the 1490/1505/1535 231P structure if you're limiting the risk to the debit paid. IOW, this would be trading at a debit if you were in the 1490/1505/1535 fly. Nothing wrong with the position as I'll often trade them at a credit, depending on stickiness. I understand that you went deep on the wing to get a credit, but you're not really being paid to do so.
Muppet, he stated that he was cautiously bullish. Why trade any spread? His edge? Do you think he filled at the offer?
Well, I don't think the bid/offer is the only way to get an advantage.
Why is he putting on that exact trade? Why is he using those exact strikes? Anything weird on the IV surface?
If he was slightly bullish, he should just buy IWM 1/2 of your usual size instead of overcomplicating things with 2 extra dimension of risk (skew/vega) and 4x commission.
It's ridiculous that people describe options positions as "strategies". The iron condor sheep slap on an IC month after month regardless of IV, Skew and correlations. Just sell 15 deltas and buy 10 deltas, yada, yada, yada.
I've seen dozends of trades like that one above. They all like "we're slightly bullish and when the market creeps up we make adjustments and then....then when time goes by the market is gonna pullback right into the tent and then we profit"
Those crap trades are even marketed. "M3", "The ROCK" and what not. Those trades just trade deltas with a little theta/vega kicker due to the fact that risk premium is consistently overpriced in indices. Works wonders in a bull market, but so does buy and hold.
So again, OP, what is your edge?
P.S.: You will be unpleasantly surprised that the P/L curve won't "bulge accordingly" but you'll get hit in the mouth quite hard instead. The downside protection is just for margin reasons and when things go south, you basically trade a 2 by 3 frontspread untill your lousy wing kicks in.
P.P.S.: Don't whine about being too old to learn greeks. Everyone who can do basic differential calculus learns this stuff in an afternoon, although applying it may take a while.
to give you a quick and dirty headstart:
-
http://www.espenhaug.com/KnowYourWeapon.pdf (can't seem to find part two anymore)
- How to Calculate Options Prices and Their Greeks: Exploring the Black Scholes Model from Delta to Vega by Pierino Ursone. (Best book on options greeks and their application ever writen)
Do this and you will stop thinking that an IV explosion will help a short body wingspread.
