Despite having been burned by last week’s colossal head-fake, we were hoping to avoid re-adjusting our RTH double-calendar—but Friday’s drop of 2.7 times the ETF’s one-day standard deviation was not a good sign. On Monday RTH fell through its 50-day moving average and closed just pennies below it. After bouncing off the 200-day MA yesterday, RTH is down again this morning and trading below our theoretical break-even. We’re once again approaching our maximum loss, so we’re making the following adjustment:

-2 RTH July 100 call
+2 RTH June 100 call
for a net credit of $0.80;

+2 RTH July 95 put
-2 RTH June 95 put
for a net debit of $1.55.

Don’t forget that two contracts here represent all of our position (e.g., if we had 4 contracts at the 100 strike, we’d be rolling all 4 of them). Now we have a single calendar put spread at the 95 strike. Normally we’d roll half as many contracts down to the 90 strike, to create a wider, triple-calendar, but our loss on last week’s adjustment pulled that strategy’s risk curve down to where the single-calendar actually has a wider profit range. Our break-evens, at $93.35 and $96.80, are still pretty close together, though, which means we might have to make another adjustment before this game is over.

Last 5 posts by Condor Options

• Midweek Sméagol Reading - August 20th, 2008
• More on The Correlation Game - August 18th, 2008
• August Monthly Review - August 17th, 2008
• They Have the Passports to Prove It - August 13th, 2008
• Sleepy Nasdaq - August 12th, 2008