XLI Analysis

The Industrial Select Sector SPDR Fund  (XLI)

Update 2/4/2020I exited my short iron condor on XLI 17 days before expiration, for 21.7% of maximum potential profit. The exit debit was $0.36 per contract share, for a $0.10 profit, with shares trading at $83.58, up $0.91 from the entry level.

XLI followed the broad market pattern of peaking in mid-January, about a week after I entered the position, and then falling for more than a week thereafter. The implied volatility rank closed at 35.5%, which is 3.5 points higher than the level at entry. For the short iron condor strategy, the hope is always for a falling IVR as the options approach expiration.

Shares rose by 1.1% over 28 days, or a +14% annual rate. The options position produced a 27.8% return for a 362% annual rate.

I have entered a short iron condor spread on XLI, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.46 credit and the stock at the time of entry was priced at $82.67

The profit zone for this position is between $86.46 on the upside and $77.46 on the downside.

The implied volatility rank (IVR) stands at 31.1.

Premium: $0.46 Expire OTM
XLI-iron condor Strike Odds Delta
Long 87.00 88.0% 12
Break-even 86.46 84.5% 15.5
Short 86.00 81.0% 19
Short 79.00 78.0% 22
Break-even 77.46 83.5% 16.5
Long 77.00 89.0% 11

The premium is 30.7% of the width of the position’s wings.

The profit zone covers a 4.6% move to the upside and a 6.7% move to the downside of the entry price, for total coverage of 11.3%

The risk/reward ratio is 2.3:1, with maximum risk of $104 and maximum reward of $46 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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