XLY Analysis

The Consumer Discretionary Select Sector SPDR Fund (XLY)

Update 1/18/2020: As I expected, the remaining put leg of my short iron condor on XLY expired without value. The results I posted on January 15 stand.

Update 1/15/2020: The short iron condor position on XLY remains net out in the money, with two more trading days after today remaining. Rather than risk having short shares dumped into my account, I’ve exited the side built for a short $126 call, which was in the money, ensured by a long $128 call. 

Assuming the remaining puts do indeed expire with no value, I exited for a $0.77 debit, producing a $0.23 loss, with shares at $126.46, up $4.35 from their entry level. If my assumption is wrong, then I shall update this analysis after expiration.

XLY began rising on the third day after entry and continued to rise until peaking on the 4th day prior to today’s exit. The implied volatility rank fell to a mere 1.5%, down 28.7 points from the entry level.

Shares rose by 3.6% over 37 days, or a +35% annual rate. The options position produced a 29.9% loss for a -295% annual rate.

I have entered a short iron condor spread on XLY, using options that trade for the last time 39 days hence, on January 17. The premium is a $0.54 credit and the stock at the time of entry was priced at $122.11.

The profit zone for this position is between $126.54 on the upside and $113.54 on the downside.

The implied volatility rank (IVR) stands at 30.2%.

Premium: $0.54 Expire OTM
XLY-iron condor Strike Odds Delta
Long 128.00 92.0% 8
Break-even 126.54 86.5% 13.5
Short 126.00 81.0% 19
Short 116.00 84.0% 16
Break-even 113.54 87.5% 12.5
Long 113.00 91.0% 9

The premium is 21.6% of the width of the position’s wings.

The profit zone covers a 3.6% move to the upside and a 7.5% move to the downside of the entry price, for total coverage of 11.2%

The risk/reward ratio is 3.6:1, with maximum risk of $196 and maximum reward of $54 per contract.

By Tim Bovee, Portland, Oregon, December 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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