Now I am not sure if I made it clear in this thread so I will cover it it since the question comes up. This is not an IRON CONDOR thread it is a credit spread thread. I am doing the ICs now because the market is pretty quiet. But I also have sold single call or single put spreads as well. If the market begins to trend again, as I expect in the fall, then I will simply take the opposite side of the trend only and pass on the Iron Condors.
As I have said, the key to credit spreads on the SPX is risk management. Falling asleep at the wheel is just not an option lol. It would not be prudent to do ICs when the market is showing signs of wild price swings. I think I am good until August/September and then will go back to sticking with the put sides since the IV skew lets me move way out of the money.
So my advice for those playing along on the home game, remember that the focus here is selling credit spreads so you have to be willing to stick with one side if the market starts showing signs of a trend other than sideways. JUNE was an amazingly flat month. It opened at 1191 and closed at 1191.... pretty wild huh?
July will exhibit the same patterns as well and so will most of August. September may usher in some fall rallies so you will see me most likely move to the put side deep OTM.
Choad is reinforcing the question of risk management and it cannot be highlighted, repeated, covered, detailed or explained enough so I thank you Choad for the comments and the data field.
If we return to "that kind of volatility" then it will become more necessary for you to be more selective which spreads you choose and which strikes. Iron Condors will become less attractive naturally.
Trading is an active sport not a passive activity. When the market changes you must adpat as well and never fall in love with any strategy. I am in love with ICs this summer but will dump her the minute the market shows more life. It is also the reason I do not put 100% of my capital in this one strategy or even selling spreads.
Remember that Diversification is not just what you call it when Diversi takes some days off (Diversi-vacation.. I know bad joke).
So stick with me as long as you can and we will see hoe we will adapt once the market shows an indication to not sit still. Should be a fun and profitable ride.
If my thread is doen nothing more than make you think more about risk management, then it is more useful than you can imagine.
Phil
Quote from Choad:
Very true.
And another take away from the data, is the idea that if you fell asleep at the wheel and the SPX managed to hit Phil's long strike (for example on the bear call spreads) which may only be about 7-9% from the initiation point, a real chunky loss of about 24 times the credit received may result in Smackdown City.
Phil is very experienced and knows how to mitigate and the strategy has been great for the last couple years, but anybody trying this may want to think about another strat, like Sam mentions, if we return to that kind of volatility.
Regards.
C
