XRT Analysis


Update 5/12/2017: XRT rose steadily beyond my position’s zone of profitability and then, in last five trading days, retreated, allowing me to exit at $1.46, or 25.1% of maximum potential profit, almost precisely at my target.

Shares showed a net rise of 2.7% over 46 days, or a +21% annual rate. The options position produced a 33.6% yield on debit for a +266% annual rate

XRT has sufficiently high volatility to qualify for trading.

I shall use the MAY series of options, which trades for the last time 53 days hence, on May 19.

Implied volatility stands at 20%, which is 1.5 times the VIX, a measure of the volatility of the S&P 500 index.

XRT’s IV stands in the 43rd percentile of its annual range and the 47th percentile of its most recent broad movement.

The price used for analysis was $41.15.

Premium: $1.95 Expire OTM  
XRT – iron fly Strike Odds Delta
Long 44.00 84.2% 18
Break-even 42.95
Short 41.00 50.0% 53
Short 41.00 49.9% 47
Break-even 39.05
Long 37.00 87.5% 11

The premium is 56% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered a position on XRT as described above. The stock at the time of entry was priced at $41.14.

By Tim Bovee, Portland, Oregon, March 27, 2017

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