Having gone somewhat "covered call" crazy last month and being somewhat ball and chained to those for the near future (most are Feb 19th expiry setups), I figured I'd turn my attention to old bread and butter standbys while I work through those particular trades, looking for setups that I can put on fairly cheaply from a buying power perspective. One of these is in TLT, which I haven't worked in a while. Because near term expirations have little volatility (current implied volatility rank is 4), I figured what I would do is go out further in time for my setup, as I did with my SPY setups when there was no volatility in near-term months in that instrument and manage the setup dynamically over time, rolling the call/put sides toward current price as time passed and the short option decayed and/or price moved.
Here's the basic setup:
April 15th 108/111/136/139 iron condor
Probability of Profit: 83%
Max Profit: $36
Buying Power Effect: ~$285
Break Evens: 110.64/136.36
Notes: As with the SPY dynamic iron condor, the notion is to roll the call or put side toward current price when it is profitable to do so to capture additional credit during the life of the setup while at the same time paying close attention to the 1 standard deviation line (basically the 84% out of the money/16% in the money line) for the expiry. The easiest thing to do in the vast majority of cases is to watch the short options price and if it is approaching worthless, check to see whether you can roll the side toward current price while staying clear of the 1 standard deviation line in light of the time remaining ... . My general rule of thumb is don't bother rolling unless you can get at least a .25 credit for doing so.
Here's the basic setup:
April 15th 108/111/136/139 iron condor
Probability of Profit: 83%
Max Profit: $36
Buying Power Effect: ~$285
Break Evens: 110.64/136.36
Notes: As with the SPY dynamic iron condor, the notion is to roll the call or put side toward current price when it is profitable to do so to capture additional credit during the life of the setup while at the same time paying close attention to the 1 standard deviation line (basically the 84% out of the money/16% in the money line) for the expiry. The easiest thing to do in the vast majority of cases is to watch the short options price and if it is approaching worthless, check to see whether you can roll the side toward current price while staying clear of the 1 standard deviation line in light of the time remaining ... . My general rule of thumb is don't bother rolling unless you can get at least a .25 credit for doing so.
