Takeoff!

And awaaaaaaay we go!

Well Traders, I executed the first Iron Condor to Riches for December. Now the fun begins! I have included a graph of the $NDX with some of my notations on it so you can follow along. As always, click on an image (sometimes twice to make it clear) to enlarge it, then "back" on your browser to return to the blog.

As you will see, the $NDX is in a serious uptrending channel that looks like it will blow through my upper spread before the expiration date. However, because of the strong resistance level the index hit and fell away from (for the fourth time this year), I believe it may have trouble piercing that and continuing. There is always a chance it may break through, but this is part of the planning process. You will also see I have indicated my first roll points (1785 & 1615) as part of my exit strategy. If the index hits either of these points with greater than 15 days to expiration (i.e. before 12/6), I roll my trade.

You must ALWAYS have an exit strategy with any investment. "Plan your trade and trade your plan!" To not have this is a recipe for disaster!

So having this graph set up, all I need to do is watch what goes on and be prepared to move if the trade gets in trouble. Pretty simple really. Since the spreads are wide, it will take some serious market action to get to either point, but that does NOT mean I can get complacent. Always watch your trades, and have alerts set up to warn you in case you are out and about and something happens. To quote MassMutual Financial Group..."You can't predict, but you can prepare."

So here is a look at my Iron Condor Analysis Sheet I created on EXCEL. It has formulas set up to calculate everything I need, every time. Beats having to do it by hand every month...what a pain that would be. So as you see, all the info I need to execute this trade is on here. The strike prices, the credit amount, the risk/reward, my exit points by dates, my profit range. Pretty comprehensive if I do say so myself! Anyway, this sheet makes life pretty easy for me. once the trade is completed, I fill in the bottom (which you can't see) and grade the trade based on success/failure. I also include my starting graph (the one on the top), and the finishing graph (the one printed on the day I close the trade) to see how I did, and keep in a journal for future reference.

For those of you who like to "gamble" a little more, here is my risk/reward analysis for December. this shows the spread distances and what the potential credits for each spread are. You will see the tighter the spreads, the more lucrative the trades can be. It is actually a strange risk/reward sequence because the tighter spreads are far more rewarding in that they pay more than they can lose, but you'll need to be in the clamest of seas to achieve that treasure! I believe it is less stressful to slowly accumulate wealth, then risk disaster for a few more bucks.

One final observation. I am ammending one of my "rules" to state that each trade will be executed on the Thursday (not Friday) 6 weeks prior to expiration. I found a substantial time value drop from yesterday to today. I think that is because the $NDX is a Thursday option expiration, not Friday.

Hope you all have a great weekend, and check back from time to time to see how the trade is going.

Happy Trading!