Stuck in the mud

Just got done taking a killer bike ride around the perimeter of the airfield, and figured it would be a good time to post as I wind down this afternoon.

 

My post title refers to the worst thing that can happen to a trader that uses reverse iron condors. I was in the AAPL Apr 12 '13w 440c/455c/420p/405p RIC at an entry price of $5.15. I needed AAPL to move at least $4 above $440, or $4 below 420 to trigger my conditional order to close the call or put leg at $9.00 for a 40% ROI. This is only about 5% to one side or the other of $430, which seemed possible given the argument traders have been having over AAPL. The 5day chart shows what really happened:

 

 

I stayed in the trade on Wednesday due to the move of nearly $10 in share price that with any follow though at all would have resulted in at the very least having a shot to break even at 440, or profit above 445. Alas, on Thursday morning disappointing PC sales numbers were release that affected AAPL negatively. Apple is the third largest supplier of desktop computers sold in the U.S. and thus got killed by the numbers. And on Friday we got stuck in the mud by an options phenomenon called "pinning" that happens on expiration day as institutions settle large numbers of contracts often causing them to gravitate to a round level and stay there.

 

Here's how the trade closed:

 

 

AAPL was the only RIC I was in that expired on the week of 12 April. Due to rules of position size that I have for myself, though the single trade was a 100% loss, in the scope of my portfolio is only a 1% loss. The lesson here is that nothing is guaranteed, and that even though RIC's are one of the higher percentage strategies that are out there, It's important not to jump into water that's too deep.

For the week that expires on April 19, I have two RIC trades that are on:

• C 46c/47c/44p/43p entered for $.50 which is about as high as I want to go to enter when spreading the strikes out so far.
• FXE 130c/131c/128p/127p entered for $.34. With the US Dollar overextended, and acting poorly at the end of the week, I think there is a good chance that a pop in the Euro can take us into profit.

I will tweet and post the result of both of these trades when the result occurs. Follow me @B50cal1978. All comments and questions are welcome. Even if you don't comment, be sure to weigh in on the poll at the top of the blog.

As always, anything posted here is only my journey, and not a recommendation to trade any securities mentioned.

STT