XBI Analysis

SPDR S&P Biotech exchange traded fund (XBI)

Update 2/3/2020: I’ve exited my short iron condor on XBI with 18 days to go before expiration. The exit debit was $0.93, producing a profit of $0.13 per contract share ($13 per contract). Shares were trading at $89.91, down $4.18 from their entry level. The exit came at 12.3% of maximum potential profit.

XBI roamed along in a sideways pattern for eight days after entry, and then began a five-day decline that brought it close to the short puts strike price, where it established a new sideways trend. Implied volatility nearly doubled during the holding period, rising by 31.6 points from 32.0% to 63.6%.

Shares declined by 4.4% over 27 days, or a -60% annual rate. The options position produced a 14.0% return for a +189% annual rate.

I have entered a short iron condor spread on XBI, using options that trade for the last time 45 days hence, on February 21. The premium is a $1.06 credit and the stock at the time of entry was priced at $94.09.

The profit zone for this position is between $102.06 on the upside and $84.06 on the downside.

The implied volatility rank (IVR) stands at 32.0%.

Premium: $1.06 Expire OTM
XBI-iron condor Strike Odds Delta
Long 104.00 90.0% 12
Break-even 102.06 85.5% 16.5
Short 101.00 81.0% 21
Short 87.00 77.0% 21
Break-even 84.06 82.0% 16
Long 83.00 87.0% 11

The premium is 30.3% of the width of the position’s wings.

The profit zone covers an 8.5% move to the upside and an 11.9% move to the downside of the entry price, for total coverage of 20.4%

The risk/reward ratio is 2.31, with maximum risk of $244 and maximum reward of $106 per contract.

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


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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