Back Into the Fray

Well Traders, it has been a month since my last post, and I have been waiting on the sidelines due to the Bullish nature of the market, and with so many of the stocks I am interested in being overbought.

I did enter into a few stocks this week, ADBE, AKAM, BBBY, and EXP.

My first Iron Condor was not as successful as I had hoped, primarily because my initial trade was too close for such a strong uptrending market. I did roll out once but the $NDX kept chasing my tail. I learned a great deal from that first trade, primarily, to make much wider spreads (in the 250-300 point range on the $NDX), especially in a "hot" market. Sure, the returns won't be as grand, but they should be consistent, and without much need to ever roll out. I also moved my roll points out to 40 for greater than 15 days, and 25 for less than 15 days (from 35 and 20 respectfully). The most impirtant thing I learned was an amazing discovery I wanted to share.


I did a hypothetical analysis of a $100,000 account that played a very conservative Iron Condor every month. Essentially a 275 point spread with returns of about $3,500/month. The initial play was 10/10/10/10 contracts until the returns added $25,000 to the account. At that point I added 5 shares to the contracts for a 15/15/15/15 play (which is $5,250/month) to see what would happen. Well, if you keep adding 5 contracts for every $25,000 added to the account, and this is at 100% success (which is reasonable to me since the spreads are pretty wide), then in theory after only 3 years, 3 months, your account would have over $600,000 in the account and would be gernerating $35,0000/month on 100/100/100/100 contract plays. Now that is some serious income!

Here is the progression:

• 10 contracts = $3,500
  
• 15 contracts = $5,250
  
• 20 contracts = $7,000
  
• 25 contracts = $8,500
  
• 30 contracts = $10,500
  
• 35 contracts = $12,250
  
• 40 contracts = $14,000
  
• 45 contracts = $15,750
  
• 50 contracts = $17,500
  
• 55 contracts = $19,250
  
• 60 contracts = $21,000
  
• 65 contracts = $22,750
  
• 70 contracts = $24,500
  
• 75 contracts = $26,250
  
• 80 contracts = $28,000
  
• 85 contracts = $29,750
  
• 90 contracts = $31,500
  
• 95 contracts = $33,250
  
• 100 contracts = $35,000
  

By the way, the $3,500 initial amount was based on fixed prices, i.e. the middle prices of the options. It could be closer to $4,000 initially if the options could be played to earn that amount. I'll let you know next Friday when I enter into December's Iron Condor. That is another thing I learned, enter your IC the Friday before 6 weeks out and take advantage of the time value before the weekend.

Happy Trading!