As of Friday’s close, none of our July Calendar Options trades had reached our profit target of 15% to 20%, although our overall portfolio was showing a small profit. With expiration week upon us, the theta of our positions has become very attractive—but our gamma risk is reaching the edge of our comfort zone, and the market waters could be tricky to navigate as the week goes on. So we’re looking to close our July trades within the next few days. Here’s the game plan:
Of our three open positions, the RTH June/July double-calendar (which is now a single-calendar spread as the result of several adjustments) carries the highest risk. We were slightly in the red on Friday, with enough delta to make the idea of cutting our risk on this one look very attractive. Depending on how things look once the market opens, we’ll probably put in a closing order this morning.
Our IBM June/July single-calendar trade has been adjusted into a triple-calendar, and based on where it was at the end of the day Friday, we think our risk isn’t terribly high. Nevertheless, we’d like to be out by Wednesday—and if it doesn’t look like the stock is staying in a narrow trading range, it might be sooner rather than later.
Because our back-month options don’t expire until September, we might be able to roll our EEM June/Sept double-calendar out to July—if the rolled position looks like it has a reasonable risk/reward profile. It all depends on whether EEM rallies and gets far enough to make a July/Sept 140/150 double-calendar look viable. Otherwise, we’ll close the position, and perhaps open a new July/Sept spread, on EEM or another equity, in a day or two.