XLV Analysis

The Health Care Select Sector SPR Fund (XLV)

Update 1/31/2020I’ve exited my short iron condor position on XLV, with 21 days left until the options expire. I got out for a debit of $0.59 per contract share, a profit of $0.08, with the stock trading at $99.29, down $2.25 from the entry level. My exit was at 11.9% of maximum potential profit.

XLV peaked 11 days after I entered the position and the began a sharp decline that was in its 7th day when I closed the position. Implied volatility did the opposite of what short option traders hope for, rising (rather than falling) by 33.65 points to 65.9%.

Shares showed a net decline of 2.2% over 24 days, or a -34% annual rate. The options position produced a 13.6% return for a +206% annual rate.

I have entered a short iron condor spread on XLV, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.67 credit and the stock at the time of entry was priced at $101.54

The profit zone for this position is between $105.67 on the upside and $95.00 on the downside.

The implied volatility rank (IVR) stands at 32.3%.

Premium: $0.67 Expire OTM
XLV-iron condor Strike Odds Delta
Long 106.33 87.0% 13
Break-even 105.67 82.0% 17.5
Short 105.00 77.0% 22
Short 97.33 77.0% 23
Break-even 95.00 82.0% 18
Long 94.33 87.0% 13

The premium is 30.9% of the width of the position’s wings.

The profit zone covers a 4.1% move to the upside and a 6.9% move to the downside of the entry price, for total coverage of 11.0%

The risk/reward ratio is 2.2:1, with maximum risk of $149 and maximum reward of $67 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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