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Okay, we’re back in our demonstration account, here. Under the trading with confidence philosophy, we are going to take a close look at closing out this SPY position. We have had this on for a couple of weeks. We only did 5 contracts, on an iron condor.
We are currently down 208 points on the Dow. That bought us back into the sweet spot here. As you can see, the white line is our current profit position. The green line is our expiration position. These are the April contracts that we’re talking about. You can see them down here. We only have 7 days left on these.
Our profit potential remaining on these contracts is only about maybe $83 or $84. We have generated $292 in profit, on just this one position. This is not our portfolio. This is just on this one position. So, we are way beyond the 20% profit that we normally like to take. We can see that the market was coming into a nice sweet spot here, in a nice position.
What we want to do is start paring back on this position. To do that, we can take off maybe 2 or 3 contracts, because we have 5 on these, on both sides. We do not like to leg out of positions. In other words, because the market is falling – it’s down to 211 points – we don’t want to take off our call position, and then take off our put position.
We could. By using the Think or Swim Analysis tool here, we could actually take a look and see what our position would look like, if we did that.
If we took off our call positions, that’s what it would look like. We would still have quite a bit of downside, here. We can go all the way down to the 127 strike, which is our short strike. That’s where we start to lose money, after that. If it goes down farther than that.
Why should we do that, when we have an 80% or better, out of a potential of $375 in profit? We have a $289 profit on that position now. Why maintain a risky position by taking off half of the iron condor, and letting the other half ride? We could end up in a less profitable position. Now, what we are doing, is we’re trading price, rather than total positions.
In other words – most people are not very good at predicting price, unless you’re a superstar. Those are 1% of all the traders in the country, or in the world, that can predict price.
What we want to do, is we put this on as a total position, when we initiated the position. We’re going to take it off as a total position, when we close the position. All we have to do is go into here, and we are going to highlight these. Then, we are going to right-click, and we are going to “Create closing order.”
This brings up our order entry screen. This is the complete opposite of what we currently have. We are currently short the 140 calls, and we’re buying them back. We were long the 142 calls, and we’re selling those. We are short the 127 puts, so we are going to buy 5, to close those out. We are long the 125 puts, so we are going to sell those to close them out.
Right now, the mid-price is 15 cents. The natural price is 17 cents. We are going to enter this at 15 cents, to see if we get filled. If we don’t get filled – let’s see what the time is, here. It’s 13:57. If we don’t get filled in 5 minutes, then we can go ahead and change our price on that. It’s currently working. The Think or Swim platform will notify us immediately, once we have sold our position out.
We’ll give this about 5 minutes. You can see the status down here. It says that it’s still working on the position, trying to get us out at 15 cents. We always like to try to hit the mid-point, if we can.
If we can’t hit the mid-point, let’s take a look… I’m just right-clicking on this line here. I’m going to go up here to “Cancel/replace order.” I always do this, just in case we don’t get filled, I like to see what the current market is.
Right now, the mid-price is at 14. I’m hoping that we will get hit at 15 within the next couple of minutes, so that we can close this position out. There’s no hurry. When you’re trading with confidence, because you have built up a profitable position, you don’t have to get out at the market. You can wait to get your price.
If we don’t get filled here within a few minutes, we’ll change it. If the market makers don’t want to give us 15 cents, no problem. We’ll go back in, and raise our price to 16 cents, and see if they give us that.
In the meantime, let them work it. Let’s see. Maybe somebody will pick this up, for 15 cents. We’re not in a hurry to get out, because we are in a profitable position. A lot of times, traders are scared, because they are so close to losing a profit that they have, or they’re in such a bad position, and they’re losing money on a daily basis.
Either they let it run and they totally ignored the position, which a lot of traders do. They keep losing money every single day, but they’re like ostriches with their heads buried in the sand. They don’t want to look at their positions, because they see how much money they’re losing. They get scared.
We’re not scared. We trade with confidence. We allow the market to do its work. We try to get the very best prices, both when we initiate positions, and when we get out of positions. We do so with confidence, because we’re usually trading from a profitable position.
There are only a couple of situations in which adjustments don’t work. I talk about those in Adjustments, so go back and take a look at those. We’re talking about closing positions that are profitable. We can afford to wait a few minutes. It’s been about 3 minutes so far, and we haven’t gotten filled yet. That’s okay. No problem.
We’re just going to hang in there, and see. Let’s see where the mid-price is, and if we can go up to 16 cents. If we wanted to get out of the market, we would go with 17 cents. If we don’t get filled at 15 cents, 2 cents is not going to make any difference on our position. Unless you were trading 30, 40, 50, or 100 contracts – yeah, maybe a penny or two is going to make a difference in your profitability.
But when you put this on, and you got a dollar credit, or 85 cents of credit in here, and you’re getting out at 15 cents, you can afford to give a penny or two to the market makers, to make them happy. Let them take a penny or two, here. Don’t be too greedy.
We’re going to let this work a little bit. It looks like the market is still around 203. Let’s take a quick look at our charts, here. These are the charts that I told you that I use when trying to determine market direction.
I’m using a 15-minute chart. When you take a look at our Adjustments and the big picture, and I mention this in a couple of other things – you want to take a look and see where the support and resistance points are. I’m not a big technical analysis guy, but I do like to take a look at the trend in general. You can see that it’s continuing to go down, here.
This little cross here might be a stabilization point. It might go up a little bit here. Let’s take a look at the daily. You can see that the market has rallied from this bottom, here. It’s coming back up. We had a big up day here, and it’s just traded sideways since then. As long as it doesn’t cut the bottom of that, I think we’ll be okay.
It will probably just stabilize, or maybe even go a little bit higher, from here.