SPDR Gold Trust (GLD)
Update 1/4/2017: GLD declined through the early portion of the holding period and then began a shallow retracement to the upside. Declining implied volatility helped the yield, and I exited at 60.1% of maximum potential profit.
Shares declined by 0.6% over 34 days, or a -7% annual rate. The options position produced a 150.5% yield on debit for a +1,616% annual rate.
The idea for this position came from trader Nick Batista at Dough. The structure produces a higher risk/reward ratio in return for wide wings on the iron condor and also has a lower implied volatility percentile than my guidelines allow.
The position, although hedged on both sides, has a long bias.
Like Nick, I shall use the JAN series of options, which trades for the last time 50 days hence, on Jan. 20.
Implied volatility stands at 19%, which stands in the 35th percentile of its annual range. The price used for analysis was $111.73.
Iron condor, short the $117 calls and long the $127 calls,
short the $110 puts and long the $100 puts,
sold for a credit and expiring Jan. 21.
Probability of expiring out-of-the-money
The premium is $2.38, which is 24% of the width of the position’s wings.
The risk/reward ratio is 3.2:1.
Decision for My Account
I’ve entered a position on GLD as described above. The stock at the time of entry was priced at $111.75.
Tim Bovee, Portland, Oregon, Dec. 1, 2016