XBI Analysis

SPDR S&P Biotech exchange traded fund (XBI)

Update 10/25/2019My short iron condor position on XBI was profitable on the day I exited, 21 days prior to expiration, the time in the options lifecycle that I exit all remaining profitable plays, leaving only the losses to deal with.

As with so much in my rulebook, the practice follows the old Wall Street argument in favor of prudence, “Bulls make money. Bears make money. Pigs get slaughtered.” I paid a $0.87 debit to exit, $0.14 below the $1.01 entry credit I received and amounting to 13.9% of maximum potential profit, with shares trading at $79.83 at exit, $4.80 above their entry level.

XBI broke from its sideways pattern 15 days after entry, rising steadily for seven days before stabilizing at a higher level. The implied volatility rank at exit was 5.2%, down 26.0 points from the entry level.

Shares saw a net rise of 6.4% over 24 days, or a 97% annual rate. The options position produced a 16.1% return for a 245% annual rate.

I have entered a short iron condor spread on XBI, using options that trade for the last time 45 days hence, on November 15. The premium is a $1.01 credit and the stock at the time of entry was priced at $75.03

The profit zone for this position is between $83.01 on the upside and $62.01 on the downside.

The implied volatility rank (IVR) stands at 31.2.

Premium: $1.01 Expire OTM
XBI-iron condor Strike Odds Delta
Long 87.00 96.0% 5
Break-even 83.01 90.0% 11.5
Short 82.00 84.0% 18
Short 66.00 82.0% 15
Break-even 62.01 87.0% 10.5
Long 61.00 92.0% 6

The premium is 20.1% of the width of the position’s wings.

The profit zone covers a 10.6% move to the upside and a 21.0% move to the downside of the entry price, for total coverage of 31.6%

The risk/reward ratio is 4:1, with maximum risk of $399 and maximum reward of $101 per contract.

By Tim Bovee, Portland, Oregon, October 1, 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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