Tuesday, July 28, 2009

07/28 RUT 30-day Iron Condor

The position got a bit of a P&L improvement Today, mostly due to an increase in Volatility. I have the contingent order to hedge the trade if we get above 560. I also have orders to close the PUT spread to lock in 80% of profits on the PUT side. If we move slightly up Tomorrow I'll be out of the PUT side.

Position's History:
07/27 RUT 30-Day Iron Condor
07/23 RUT 30-Day Iron Condor
7/22 RUT 30-Day Iron Condor
7/21 RUT 30-Day Condor *New*

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Martin said...

Gustavo, how does an increase in volatility help your iron condor's P&L? ICs normally have negative vega. I guess all of the positive vega in your 600C and 620C is the reason, correct?

Gustavo's Trades said...

Correct, when I started the trade I had 1 extra long PUT and CALL, those serve as insurance against an large price swing they increase the vega, however, at this point, the position is still vega negative.

Once I hit the 550 price zone, I added the SEP 620 CALL. This further increased the vega, now the position (at these levels) is vega positive.

See the "Live" line on the profile chart, you'll notice that the vega is positive, so if the volatility increases, it helps the position.

Hope that helps.