This new trade satisfies many requests from subscribers for a very conservative and safe trade to execute during this very volatile period. This is one trade you can execute and forget about for 41 days. It’s a boring trade with low trading costs. Being more than 200 points away on any credit spread trade is a huge safety net. We can only achieve these distances by trading a 50 point spread on the NDX index. I will send an update on this trade next weekend after the August trades expire. In a weeks time this trade should still be safe and have a 4% return.
The goal of this Iron Condor is to have short options 200 or more points away from the current index value. The 4.2% return is an outstanding return for 41 days. The margin requirements for this trade is $5,000 per contract, so 2 contracts will require $10,000 and earn $400 (4.2%). What is nice about this trade is that only a few contracts earns you a very decent credit premium and return. This means your trading costs are low.
The current probabilities at expiration that the NDX Index prices will finish below the short option, or above the long option, is 2% and 10% based on the current volatility of the NDX Index. Also, both of these short option strikes are more than 2 standard deviations away from the projected NDX index value at expiration in September. Both credits are the midpoints with cents shaved off so your orders could take a 1 to 5 days to be filled. If one side is not filled in a weeks time a replacement trade will be emailed.
The NDX index has to fall or rise by more than 17% and 13% to reach these strikes. This means the NDX Index can make a 10% correction and our trades will still be out of the money and safe.
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