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Roger Malek
My question is regarding the NOC rolls on 6/20 and 6/28. On 6/20 we rolled the IC expiring on 6/21 to an IC expiring on 6/28 for a NC of 6.40. Today, 6/28 we were able to close the 317.50 short call that is ITM for a suggested ND of 2.50. I am surprised that there was a net profit (6.40 -2.50) since the trade being closed on 6/28 is only hours from expiration. Can someone explain? Doesn't it usually cost more to close a losing trade than a credit received when opening the trade?
I am probably missing something obvious.
Jim Fink
The iron condor was opened with substantial time value of 6.40 and this time value has now decayed to zero, whereas the stock moved into the money by only 2.50 to 3.50.
When the amount of time-value decay is greater than an iron condor’s intrinsic value remaining at expiration, the iron condor will be profitable.
Stock Talk
Roger Malek
My question is regarding the NOC rolls on 6/20 and 6/28. On 6/20 we rolled the IC expiring on 6/21 to an IC expiring on 6/28 for a NC of 6.40. Today, 6/28 we were able to close the 317.50 short call that is ITM for a suggested ND of 2.50. I am surprised that there was a net profit (6.40 -2.50) since the trade being closed on 6/28 is only hours from expiration. Can someone explain? Doesn't it usually cost more to close a losing trade than a credit received when opening the trade?
I am probably missing something obvious.
Jim Fink
The iron condor was opened with substantial time value of 6.40 and this time value has now decayed to zero, whereas the stock moved into the money by only 2.50 to 3.50.
When the amount of time-value decay is greater than an iron condor’s intrinsic value remaining at expiration, the iron condor will be profitable.
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