Our first step towards reducing risk prior to expiration week is to close the position contributing more risk than remaining profit potential. This adjusted trade is all delta and vega, with very little theta left at the current underlying price. Our closing order is as follows:
Day limit order
Buy to close 2 SPY Apr 136 calls
Sell to close 2 SPY May 138 calls
Buy to close 2 SPY Apr 126 puts
Sell to close 2 SPY May 120 puts
for a net credit of $0.88 or better.
Note that the 2 contracts specified above represent our entire stake in this adjusted position.
Bonus Trade: An alternative to closing this position would be to roll the short strikes out to May and create a narrow, unbalanced, May iron condor (120/126/136/138). The double-calendar trade one would use to accomplish this is,
Buy the Apr 136 calls
Sell the May 136 calls
Buy the Apr 126 puts
Sell the May 126 puts,
and it’s currently mid-priced at about $2.10 (credit).
NOTE that as a Bonus Trade, it will not be autotraded or followed up. Members who aren’t confident in their ability to manage iron condors on their own are encouraged to simply flatten out. But for anyone interested in the opportunity to recover some of the loss from this position, here’s what the profile looks like for the resulting unbalanced iron condor: