XOP Analysis

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

Update 9/27/2019I’ve exited my short iron condor position on XOP 21 days prior to expiration. That point is management day, when I take the profits and run on all of my money-making positions, leaving only the unprofitable ones for me to figure how to squeeze out a dime or two. The exit cost a $0.35 debit,  leaving a $0.09 profit, with shares trading at $22.56, which is $0.81 above entry point.

The position produced 20.5% of maximum potential profit. My goal, as always for iron condors, was 50% of max, so I got out with less than half of what I had hoped for. The implied volatility rank was 43.0%, down 1.2 percentage points from the entry level. 

XOP rose steadily for 13 trading days after entry, culminating in an upward gap of nearly 12% that placed the price well above the short calls strike. That proved to be the peak, and XOP declined steadily until I exited, ending up easily within the profit range.

Shares showed a net rise of  3.7% over the 23-day holding period, or a +59% annual rate. The options position produced a 25.7% return for a +408% annual rate.

I have entered a short iron condor spread on XOP, using options that trade for the last time 44 days hence, on October 18. The premium is a $0.44 credit and the stock at the time of entry was priced at $21.75.

The profit zone for this position is between $24.44 on the upside and $17.44 on the downside.

The implied volatility rank (IVR) stands at 40.6%.

Premium: $0.44 Expire OTM
XOP-iron condor Strike Odds Delta
Long 26.00 95.0% 6
Break-even 24.44 88.0% 14
Short 24.00 81.0% 22
Short 19.00 80.0% 16
Break-even 17.44 86.5% 11
Long 17.00 93.0% 6

The premium is 22.0% of the width of the position’s wings.

The profit zone covers a 12.4% move to the upside and a 24.7% move to the downside of the entry price, for total coverage of 37.1%

The risk/reward ratio is 3.5:1, with maximum risk of $156 and maximum reward of $44 per contract.

By Tim Bovee, Portland, Oregon, September 4, 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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