XOP Analysis

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

Update 12/13/2019I exited my short iron condor position on XOP for a profit, seven days before expiration. The exit debit was $0.49, giving a $0.31 profit on the options, with the underlying shares trading at $21.94, down $1.08 from their level at entry. The exit came at 38.8% of maximum potential profit.

I entered the position at what proved to be a minor peak. XOP traced a shallow decline for nearly a month and then resumed a slow rise, remaining below the entry peak. The implied volatility rank declined by 15.4 points during the holding period, to 12.0% at the exit.

Shares declined by 4.7% over 38 days, or a -45% annual rate. The options position produced a 63.3% return for a +608% annual rate.

I have entered a short iron condor spread on XOP, using options that trade for the last time 45 days hence, on December 20. The premium is an $0.80 credit and the stock at the time of entry was priced at $23.02.

The profit zone for this position is between $25.80 on the upside and $20.80 on the downside.

The implied volatility rank (IVR) stands at 27.4.

Premium: $0.80 Expire OTM
XOP-iron condor Strike Odds Delta
Long 27.00 91.0% 12
Break-even 25.80 83.5% 20.5
Short 25.00 76.0% 29
Short 22.00 62.0% 33
Break-even 20.80 73.0% 23.5
Long 20.00 84.0% 14

The premium is 40.0% of the width of the position’s wings.

The profit zone covers a 12.1% move to the upside and a 10.7% move to the downside of the entry price, for total coverage of 22.7%

The risk/reward ratio is 1.5:1, with maximum risk of $120 and maximum reward of $80 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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