Live: Tuesday, June 25, 2019

1:20 p.m. New York time

GDXJ has moved back down into its zone of profit. Although the position remains unprofitable at this point, being within the zone makes it profitable at expiration, on July 19. If it turns profitable by Friday, 21 days prior to expiration, then I would exit then. If it remains unprofitable, then after Friday it comes under my “sudden death” rule, requiring an exit immediately if it moves beyond the profit zone, or if it becomes currently profitable. In any case, I exit all positions on the Monday before expiration.

The KRE position still has an exit order that has not yet been filled. Two other positions, NVDA and SMH, are profitable at this point but have not reached 50% of maximum potential profit and will be exited on Friday if they remain profitable.

10:15 a.m. New York time

As it did yesterday, GDXJ remains above the profit zone, with less than a day (0.73) to return to profitability at the present 14-day average rate of change. My exit point comes when it takes a full day or more to return at the current ROC.

9:55 a.m. New York time

It never fails. The busiest days are the days when I need to leave my trading desk. In today’s case, it’s dental work.

I’ve exited IWM for a $0.31 debit and XOP for a $0.17 debit, each at 50% of maximum potential profit. I’ve placed an exit order on KRE for a $0.30 debit; it is presently going for $0.33 and the order hasn’t yet been filled.

Full results later in the session.

By Tim Bovee, Portland, Oregon, June 25, 2019

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Live: Monday, June 24, 2019

3:15 p.m. New York time

GDXJ has moved beyond the profit zone. Under my rules, at this point I calculate the price’s distance beyond the zone in days. If the price is one day or more beyond the zone, then I exit. In GDXJ’s case, distance works out to be 0.6 days above the zone. That’s less than a day, and so I’ll stay in the position for now.

12:50 p.m. New York time

The oil and gas exploration and production fund XOP has moved close to 50% of maximum potential profit, and I have placed an exit order for a $0.17 debit.

My junior gold miners fund GDXJ position is unprofitable and yet, just barely, remains within the profit zone. All other positions are showing profits. Under my rules, all profitable positions will be exited by Friday, June 28, which is 21 days before expiration.

9:50 a.m. New York time

The regional banking fund KRE has again moved to 50% of maximum potential profit, and I have placed an exit order for a $0.30 debit.

By Tim Bovee, Portland, Oregon, June 24, 2019

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Live: Thursday, June 20, 2019

11:55 a.m. New York time

The stock underlying my short iron condor on KRE goes ex-dividend on Friday, increasing the chances that the short options in my position might be assigned.

The short options are at greatest risk when they are out of the money and the dividend is greater than the remaining extrinsic value. Added to the picture: KRE is presently trading at 35% of maximum potential profit, making an early exit more attractive. My normal exit day for a profitable position is 21 days before expiration. In KRE’s case, that would be June 28, or a week from the ex-dividend date, a time short enough to lessen the attraction of holding on through ex-div.

Here’s the math.

The lowest quarterly dividend of the last four was $0.2419 and the highest, $0.3187, for an average of $0.2803.

My position has a short call with a $56 strike and an extrinsic value of $0.12, and a short put with a $48 strike and an extrinsic value of $0.39. The shares are presently trading at $51.75, so both strikes remain comfortably out of the money.

When the stock goes ex-dividend, we can expect the price to drop by the amount of the dividend. For caution, I’ll use the maximum of the last four quarters, rounded to 32 cents. That gives a decline to $51.43, leaving the options still within the money.

At this point I conclude that there’s a low risk of assignment. Both short options are out of the money and have extrinsic value greater than the estimated dividend.

A low risk, however, still has risk. Things change quickly in the markets, and what is now a low risk situation could become riskier. Or the position could be assigned for some other reason. At this point, I’m willing to take the risk. I’ll redo the calculations closer to the market close, and post here if I’ve changed my mind.

By Tim Bovee, Portland, Oregon, June 20, 2019

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Live: Wednesday, June 19, 2019

2:15 p.m. New York time

My positions remain within their profit zones following the Federal Open Market Committee’s decision to leave the target Federal Funds rate unchanged, at 2.25 to 2.5%.

I note that the overall FOMC projections (top chart) released this afternoon show, compared to December’s projections, lower GDP growth, higher unemployment and lower inflation. The look-ahead has grown less optimistic in the past six months.

By Tim Bovee, Portland, Oregon, June 19, 2019

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Live: Friday, June 14, 2019

2:45 p.m. New York time

Decision time. Nothing to do with my trading rules, but IWM goes ex-dividend on Monday. If any of my short options are in the money, they could candidates for assignment.

Normally on the day a stock goes ex-dividend, it can be expected to show price decline by the amount of the dividend. If the price drop puts a short option in the money, it is more likely to be assigned, if the dividend is greater than the remaining extrinsic value (time and volatility value) of the option.

My IWM position in a short iron condor, with both short calls and short puts. The short calls have $159 strike, with an extrinsic value of $0.605, and the short puts a $140 strike, with an extrinsic value of $0.635.

IWM is now trading at $152.02, and the next dividend is expected to be between 40 and 45 cents. So the lowest I expect the ex-dividend drop to be is $151.57. At that price, my calls and my puts are both out of the money, the extrinsic value is well above the expected dividend, and so an assignment in unlikely.

Unless there’s a shockingly large price change between now and the market close, I shall hold my IWM iron condor through the ex-dividend date. The position is presently at 29% of maximum potential profit.

My other positions are all ending the week within their profit zones.

By Tim Bovee, Portland, Oregon, June 14, 2019

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Live: Wednesday, June 12, 2019

10 a.m. New York time

With 37 days left until expiration, my positions remain within the profit zone. None is close to the exit at 50% of maximum potential profit prescribed by my trading rules–the closest is IWM at 27% of max. And so I wait, like sailing ship stuck in the equatorial latitudes, stuck in the doldrums as theta–time decay–does its work in bringing each position to a–knock on wood–profitable ending.

All of my positions are short iron condors with the two short strike prices set very far apart, with a delta of 20 or less, providing odds of the options expiring within that range at 85% or so. While time decay destroys the value of long options, it adds to the value of short options, helping them along to a profit.

This  method of trading provides very little drama, except around 42 days prior to expiration, when I’m entering new positions, and 21 days prior, when I’m closing profitable positions and those that have moved outside the profit range.

To my thinking, the way I trade is perfect for people who have lives beyond the markets. It allows much time for other things. Most often the word “doldrums” is used in a negative sense, “the economy is in the doldrums”, for example. But in the case of this trading method, the doldrums are a good thing.

By Tim Bovee, Portland, Oregon, June 12, 2019

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NVDA Analysis

NVIDIA Corp. (NVDA)

I have entered a short iron condor spread on NVDA, using options that trade for the last time 42 days hence, on July 19. The premium is a $1.81 credit and the stock at the time of entry was priced at $146.24.

The profit zone for this position is between $166.81 on the upside and $116.81 on the downside.

The implied volatility rank (IVR) stands at 32.4%.

Premium: $1.81 Expire OTM
NVDA-iron condor Strike Odds Delta
Long 175.00 93.0% 6
Break-even 166.81 89.5% 10.5
Short 165.00 86.0% 15
Puts
Short 125.00 84.0% 13
Break-even 116.81 88.5% 9.5
Long 115.00 93.0% 6

The premium is 18.1% of the width of the position’s wings.

The risk/reward ratio is 4.5:1.

By Tim Bovee, Portland, Oregon, June 7, 2019

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Live: Friday, June 7, 2019

11 a.m. New York time

My order for a short iron condor on NVDA has been filled at my asking price, and I’ve posted the analysis.

10:10 a.m. New York time

I’ve placed an order for a short iron condor on NVDA, with an asking price of $1.81. The shorts are $165 for the all and $125 for the put, with $10 wide wings.

My current holdings are all within the profit zone and expire July 19.

By Tim Bovee, Portland, Oregon, June 7, 2019

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