Wednesday, March 17, 2010

Closed half of WFC iron condor

I've closed half of my March WFC iron condor position with the stock selling for $30.55, 5.3% above the zone of maximum profit.

The net loss on the options was 51%.

As an iron condor, WFC stayed within the expected range until March 5, when it started easing out. It did so without a lot of commitment, which makes the decision to exit much more difficult.


When it broke the $29.43 reversal level on March 10, that should have been the signal to bail. But I didn't, and so it goes.

I structured the iron condor (p26/-p27/-c29/c30) to be $2 wide on the short strikes. That's 7%, which is really quite reasonable. However, I could have given myself more protection, obviously, by widening the spread to $4 or $5 and accepting a lower premium.

Some people, it is said, lack peripheral vision, and as I age I increasingly suffer that loss. As a trader, however, I'm proud to report that my hindisght vision is 20:20!

Abbreviations:
psar - Parabolic Stop and Reverse
adx - Average Directional Index
pps - Person's Proprietary Signal
ma20 - 20-day moving average
macd - Moving Average Convergence-Divergence
mfi - Money Flow Index
sto - Fast Stochastic
  

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