XLY Analysis

The Consumer Discretionary Select Sector SPDR Fund (XLY)

Update 1/31/2020: I exited my short iron condor on XLY today, 21 days before expiration, for a $0.79 debit, a profit of $0.08 per contract share, at 9.2% of maximum potential profit. Shares were trading at $126.36, having risen $0.43 above the entry level.

XLY maintained a rising trend for 10 days after entry, and on the 11th day began a sharp decline that has lasted into the 7th day, when I exited. Implied volatility stood at 34.0% at exit, down 16.7 points from the entry level.

Shares rose by a net 0.3% over 24 days, or a +5% annual rate. The options position produced a 10.1% return for a +154% annual rate.

I have entered a short iron condor spread on XLY, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.87 credit and the stock at the time of entry was priced at $125.93.

The profit zone for this position is between $130.87 on the upside and $117.87 on the downside.

The implied volatility rank (IVR) stands at 50.7%.

Premium: $0.87 Expire OTM
XLY-iron condor Strike Odds Delta
Long 132.00 87.0% 12
Break-even 130.87 81.5% 17.5
Short 130.00 76.0% 23
Short 121.00 77.0% 23
Break-even 117.87 82.5% 17.5
Long 117.00 88.0% 12

The premium is 29.0% of the width of the position’s wings.

The profit zone covers a 3.9% move to the upside and a 6.8% move to the downside of the entry price, for total coverage of 10.8%

The risk/reward ratio is 2.4:1, with maximum risk of $213 and maximum reward of $87 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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