QQQ Analysis

Invesco Powershares QQQ (QQQ)

Update 3/21/2020My short iron condor option position QQQ wrapped up in several steps: I exited the call options, one of which was in the money and so vulnerable to assignment, on March 13, and let the put options expire after the closing bell on March 20. I had entered the position before the market crash began.

The options position overall went for a $4.95 debit, a loss of $3.97, with shares having opened the day at $181.74, down $45.80 from their price at entry.

QQQ, like most of the market, rose steadily from entry until February 19, when it peaked. It fell slightly the next day, and thereafter picked up speed in its decline. The implied volatility rank was 73.1% at exit, up 42.8 percentage points from the entry level.

Shares declined by 20.1% over 44 days, or a -552% annual rate. The options position produced a -81.0% loss for an annual rate of -665%.

I have entered a short iron condor spread on QQQ, using options that trade for the last time 44 days hence, on March 20. The premium is a $0.98 credit and the stock at the time of entry was priced at $227.50.

The profit zone for this position is between $238.98 on the upside and $210.98 on the downside.

The implied volatility rank (IVR) stands at 30.3%.

Premium: $0.98 Expire OTM
QQQ-iron condor Strike Odds Delta
Long 240.00 87.0% 14
Break-even 238.98 84.5% 16.5
Short 238.00 82.0% 19
Short 215.00 79.0% 20
Break-even 210.98 82.0% 17
Long 210.00 85.0% 14

The premium is 28.0% of the width of the position’s wings, a bit narrower than I like.

The profit zone covers a 5.0% move to the upside and a 7.8% move to the downside of the entry price, for total coverage of 12.9%

The risk/reward ratio is 2.6:1, with maximum risk of $252 and maximum reward of $98 per contract.

By Tim Bovee, Portland, Oregon, February 5, 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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