EEM Analysis

iShares MSCI Emerging Markets exchange traded fund (EEM)

Update 2/11/2020: I’ve exited my short iron condor position on EEM for a $0.15 debit — identical to the profit — with shares trading a $44.14, down $0.66 from the price at entry. 

EEM peaked four days after I entered the position, dithered near the top for four more days, and then began a sharp decline for nine days. It thereafter recovered about half of its loss, allowing the options to reach my optimal exit level, which is half of maximum potential profit.

The implied volatility rank stands at 27.4%, down two points from the entry level.

Shares showed a net decline of 1.5% over 35 days,  or a -15% annual rate. The options position produced a 100% yield for a +1,043% annual rate.


I have entered a short iron condor spread on EEM, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.30 credit and the stock at the time of entry was priced at $48.83

The profit zone for this position is between $47.03 on the upside and $42.03 on the downside.

The implied volatility rank (IVR) stands at 27.6.

Premium: $0.30 Expire OTM
EEM-iron condor Strike Odds Delta
Long 47.73 90.0% 10
Break-even 47.03 84.5% 15.5
Short 46.73 79.0% 21
Puts
Short 43.00 76.0% 23
Break-even 42.03 81.0% 18
Long 41.73 86.0% 13

The premium is 26.4% of the width of the position’s wings.

The profit zone covers a 4.9% move to the upside and a 6.7% move to the downside of the entry price, for total coverage of 11.6%

The risk/reward ratio is 2.8:1, with maximum risk of $83.50 and maximum reward of $30.00 per contract.

By Tim Bovee, Portland, Oregon, January 7, 2020

Disclaimer

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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