QQQ Analysis

Invesco Powershares QQQ (QQQ)

Update 8/23/2019: My short iron condor position on QQQ reached half of maximum potential profit, and I exit for a $0.93 debit, with shares trading at $187.36, up $1.56 from their price at entry. The profit per contract was $93.00.

The stock traced a sideways trend during my holding period. It fell sharply on the day I exited, following a tweet by Trump, but only after I had exited. The market response to the president’s tweet reduced the position’s profit to well below 50% of its maximum potential. It was one of those fortuitous events of timing that never fails to put a smile on a trader’s face. The implied volatility rank at exit was 27.6%, down 3.6 percentage points from the entry level.

Shares rose by 0.8% over 14 days, or a +22% annual rate. The options position produced a 100.0% return for a +2,607% annual rate.

I have entered a short iron condor spread on QQQ, using options that trade for the last time 42 days hence, on September 20. The premium is a $1.86 credit and the stock at the time of entry was priced at $185.78.

The profit zone for this position is between $198.86 on the upside and $158.86 on the downside.

The implied volatility rank (IVR) stands at 31.2.

Premium: $1.86 Expire OTM
QQQ-iron condor Strike Odds Delta
Long 203.00 96.0% 5
Break-even 198.86 90.0% 10.5
Short 197.00 84.0% 16
Short 171.00 81.0% 17
Break-even 158.86 87.0% 11.5
Long 157.00 93.0% 6

The premium is 18.6% of the width of the position’s wings.

The profit zone covers a 7.0% move to the upside and a 16.9% move to the downside of the entry price, for total coverage of 24.0%

The risk/reward ratio is 4.4:1, or $814 in maximum risk to $186 in maximum reward.

By Tim Bovee, Portland, Oregon, August 9, 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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