XLU Analysis

Utilities Select Sector SPDR Fund (XLU)

Update 11/26/2019XLU closed in on 50% of maximum potential profit and I exited for a debit of $0.43, leaving a $0.42 profit on the options. At exit shares were trading at $63.05, up $0.30 from their price at entry.

XLU declined for the first week I held the position and then rose to four days to the level from which the decline began, thereafter holding steady within a narrow range. The implied volatility range declined by 17.3 points during the lifespan of the position, to 9.7%.

Shares rose by 0.5% over 21 days, or a +8% annual rate. The options position produced a 97.7% profit for a +1,698 annual rate.

I have entered a short iron condor spread on XLU, using options that trade for the last time 45 days hence, on December 20. The premium is a $0.85 credit and the stock at the time of entry was priced at $62.75.

The profit zone for this position is between $64.85 on the upside and $58.85 on the downside.

The implied volatility rank (IVR) stands at 27.0%.

Premium: $0.85 Expire OTM
XLU-iron condor Strike Odds Delta
Long 66.00 92.0% 9
Break-even 64.85 80.0% 20.5
Short 64.00 68.0% 32
Short 61.00 71.0% 29
Break-even 58.85 80.5% 19.5
Long 58.00 90.0% 10

The premium is 34.0% of the width of the position’s wings.

The profit zone covers a 3.3% move to the upside and a 6.6% move to the downside of the entry price, for total coverage of 10.0%

The risk/reward ratio is 1.9:1, with maximum risk of $165 and maximum reward of $85 per contract.

By Tim Bovee, Portland, Oregon, November 5, 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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