XOP Analysis

SPDR S&P Oil and Gas Exploration and Production ETF (XOP)

Update 5/31/2019I exited XOP when its price declined below the position’s profit zone, or the range between the two breakeven points of the short iron condor. My rules require a exit if the distance beyond the profit zone would require two days or more to return, using the 14-day average of the Rate of Change metric as an estimate of maximum speed. At exit XOP stood 2.2 days below the profit zone.

I exited for a $1.90 debit, $1.38 greater than the credit I received upon entering, with shares trading a $25.63, or $5.58 lower than when I entered the position.

XOP fell for three days while remaining within the profit zone, then traded sideways until a week before exit, when it gapped down below the zone’s lower boundary and continued to decline, gapping down yet again at the opening today, triggering the exit signal. The fossil fuel prices that underly the companies within the holdings of the exchange-traded fund fell for much of my holding period, and the final downward slide came in response to the Trump administration’s decision to place a 5% tariff on Mexico, which would add to the costs of U.S. refiners.

Shares declined by 17.9% over 32 days, or a -204% annual rate. The options position produced a -73% loss for a -828% annual rate. The implied volatility rate rose to 49% during my holding period.

I have entered a short iron condor spread on XOP, using options that trade for the last time 53 days hence, on June 21. The premium is a $0.53 credit, and the stock at the time of entry was priced at $31.21.

The profit zone for this position is between $35.53 on the upside and $25.53 on the downside.

The implied volatility rank (IVR) stands at 25.

Premium: $0.53 Expire OTM
XOP-iron condor Strike Odds Delta
Long 38.00 96.0% 4
Break-even 35.53 90.0% 10.5
Short 35.00 84.0% 17
Short 28.00 81.0% 17
Break-even 25.53 87.5% 10.5
Long 25.00 94.0% 4

The premium is 17.7% of the width of the position’s wings.

The risk/reward ratio is 4.7:1.

By Tim Bovee, Portland, Oregon, April 29, 2019


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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2 thoughts on “XOP Analysis

  1. […] Despite the Sturm und Drang of the markets as the U.S.-China tariff war heats up, my six positions remain within their profit ranges. The options positions are all short iron condors with the short calls and puts set as close to a 20 delta at entry as the grid would allow. The stock symbols corresponding to my options positions, with links to the analyses, are  CGC, IYR, UNH, XBI, XLB and XOP. […]


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