Quarterly Options Expiration And Those Darn Trading Rules! :)

OK, this is just getting disgusting. I expected rallying into Quarter/Month End but damn, this has been a little ridiculous. Can you say "Painting The Tape?"

As you can see, I am still a little bitter about having to close the expiring Quarterly SPY position today as the rally got too close to the short strike. An Iron Condor was opened 6/21 on the SPY with comfortably wide strikes. However, this week's 4%+ rally brought the SPY right up to the short strike. Following strict trading rules, I closed the call side of the Condor today mid-morning. It was a good thing since the SPY traded at or above the short strike most of the afternoon.

Bottom line: The performance of the Iron Condor equaled 2.82% for the 9 day trade. An initial credit of $0.23 was received for both sides and today's closing transaction was executed for $0.18. Thus, a $0.05 gain on margin requirements of $1.77.

To be more precise (and in my pursuit of complete transparency), the puts received an opening credit of $0.11 and expired worthless for full profit. The calls received an opening credit of $0.12 and required a debit of $0.18 to close.

The Q put spread opened, 5/25 and rolled on 6/10, expired for full profit today. Bottom line: 6.95% for the 36 day trade.

Back to the SPY closing trade, following trading rules is a cornerstone of successful trading. Some of you might have gambled on the close today HOPING the SPY would close before $132; the location of our short spread strike. The key word there is hoping. Yes, ultimately the SPY closed below $132, however, for most of the day it was trading between $131.85 - $132.10.

Hope is not an investment strategy. Closing a trade early to avoid a loss is always the right thing to do. For those that gambled and got lucky - congratulations! However, just realize that the SPY could have very easily gapped UP another dime in the final 2 minutes of trading rather than dropping a dime like it did; which would have caused much more pain for spread sellers gambling on the close. Conserve capital, trade smart, and live to trade another day!

Stay tuned and happy Friday!

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