XLP Analysis

Consumer Staples Select Sector SPDR Fund (XLP)

Update 3/13/2020: I entered my short iron condor position on XLP prior to the Crash of 2020, and exited on March 13, a week before expiration, for a significant loss.

I exited for a $1.04 debit per contract share, a loss of $0.74, with shares trading for $54.42, down $9.95 from entry.

The markets generally began a sharp decline from their peak on February 19 at an unusually swift velocity. The implied volatility rank at exit was 91.8%, up 56.4 points from the entry level.

Shares declined by 18.3% over 36 days, or a -98% annual rate. The options position produced an 73.1% loss for a -461% annual rate.

I have entered a short iron condor spread on XLP, using options that trade for the last time 43 days hence, on March 20. The premium is a $0.30 credit and the stock at the time of entry was priced at $64.37.

The profit zone for this position is between $66.30 on the upside and $61.30 on the downside.

The implied volatility rank (IVR) stands at 35.4%.

Premium: $0.30 Expire OTM
XLP-iron condor Strike Odds Delta
Long 67.00 88.0% 12
Break-even 66.30 81.0% 18.5
Short 66.00 74.0% 25
Short 62.00 81.0% 20
Break-even 61.30 84.5% 16.5
Long 61.00 88.0% 13

The premium is 30% of the width of the position’s wings.

The profit zone covers a 3% move to the upside and a 5% move to the downside of the entry price, for total coverage of 8%

The risk/reward ratio is 2.3:1, with maximum risk of $70 and maximum reward of $70 per contract.

By Tim Bovee, Portland, Oregon, February 6, 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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