your #1 site for FREE swing & day trading content
|
|
|
Participate in the Rally with a Broken Call Condor: Followup
Back on April 9, we published a bonus trade for our members that allowed them to participate in the rally that ensued, but with absolute downside protection. We brought in a $0.20 credit upon opening the position, and you could sell it to close today for about $0.32, which means this trade returned $0.52, for a 28% return on capital risked. Not too shabby. The broken call condor was constructed like this: +1 SPY May 141 call Since we took in a credit on this trade, there was literally no downside risk: if SPY fell to 130 or 120 or 0, we’d still keep the $0.20 credit. A monster rally above 145 would’ve meant trouble, but was also relatively unlikely given prevailing market and economic woes. As time progressed, the short 144/147 vertical decayed in value and is now nearly worthless, while the long 141/142 vertical became quite profitable. We took more initial risk by taking in a credit and using nearer strikes, but this paid off when the SPYs moved back lower last week. by CondorTrader (Condor Options) Disclaimer: Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital. |
|
|||||||||||||||||||||||||||||||||||||||
