Today, I closed out the 95/92 put spread (net debit $0.08, 22% profit in 31 days) from my October 2009 Long Iron Condor (LIC) and re-deployed the capital into a 100/97 put spread (net credit ($0.23) for the same period. The rationale is that, with the 1.79% gain in SPY, there was very little upside left for this position ($8 of potential profit per unit) given the amount of capital required.
So, with the new position, the same capital exposes us to $23 of potential profit per unit with not much risk (now 8% vs. theoretically 0% in the old position). Further, if the market does roll over from here, we’re able to more quickly capture upside from this development by buying back the sold puts @ 100 and enjoying the apprecation of the bought puts @ 97. However, I wouldn’t pull the trigger on such a move until SPY moved significantly below 103.85, where my first buyback of sold puts (@ 101) is positioned.
So, after cashing in the 22% profit and enjoying a weekend of time decay, here’s where we stand in terms of both positions and profit/loss:
A 100/97 put spread, originally priced at a net credit of $0.23 and now worth $0.24–a 2% loss. (22% of Oct. LIC)
A 101/98 put spread, originally priced at a net credit of $0.43 and now worth $0.30–a 4% profit. (27% of Oct. LIC)
A 116/113 call spread, originally priced at a net credit of $0.20 and now worth $0.11–a 2% profit. (24% fo Oct. LIC)
A 114/111 call spread, originally priced at a net credit of $0.46 and now worth $0.31–a 5% profit (8% of Oct. LIC)
A 112/111 call spread, originally priced at a net credit of $0.27 and now worth $0.15–a 8% profit (17% of Oct. LIC)
Altogether, that’s a current 3% in unrealized profit with the ability to reach 14% by October 17, if we can stay between 101 and 111 on SPY. We’re also earning an annualized yield of 260% with a time decay payoff of $533/day per $100,000 invested. Keep your fingers crossed!