Russell 2000 (IWM)
All right, it’s time to start selling some more premium.
We currently have one open position (currently profitable), an iron condor in SPY, and I want to add another iron condor today, this time in the Russell 2000 (IWM).
Russell 2000 (IWM)
With the Russell 2000 (IWM) trading for 185.75, I want to place a short-term iron condor going out 44 days. As always, my intent is to take off the trade well before the October 20, 2023, expiration date.
IV: 19.9%
IV Rank: 11.2
Expected Move (Range): The expected move (range) for the October 20, 2023, expiration cycle is from 177 to 194.
Call Side:
Put Side:
The Trade
Simultaneously:
- Sell to Open IWM October 20, 2023, 199 call strike
- Buy to Open IWM October 20, 2023, 204 call strike
- Sell to Open IWM October 20, 2023, 169 put strike
- Buy to Open IWM October 20, 2023, 164 put strike … for a total of $0.62. (As always, the price of the spread can vary from the time of the alert, so please adjust accordingly if you wish to take on a position.)
*Our margin of error is roughly 7.5% to the upside and more than 7.5% to the downside over the next 44 days.
Delta of spread: -0.07
Probability of Profit: 89.28% (upside) – 87.97% (downside)
Probability of Touch: 20.76% (call side) – 24.31% (put side)
Total net credit: $0.62
Total risk per spread: $430
Max return: 14.2%
Risk Management
Since we know how much we stand to make and lose prior to order entry we can precisely define our position size on every trade we place. Position size is the most important factor when managing risk, so keeping each trade at a reasonable level allows not only the Law of Large Numbers to work in your favor … it also allows you to sleep well at night.
I tend to set a stop-loss that sits 1 to 2 times my original credit. Since I’m selling the 204/199 – 169/164 iron condor for roughly $0.62, if my iron condor reaches approximately $1.24 to $1.86, I will exit the trade. As always, I will keep you updated on the status of the position as it progresses and send any necessary updates.
