IWM Trade

iShares Russell 2000 ETF (IWM)

Update 2/26/2021 

This is 20 days prior to options expiration for this short iron condor spread on IWM. By my rules I would normally close the position today. It is unprofitable, although trading within the profit zone, below the short call strike price of 220..

I’ve decided to hedge my rule and hold the position over the weekend, based on Elliott wave analysis. IWM is now in a 4th wave of Subminuscule degree. The 5th wave that will follow shortly will bring the price further down into the profit zone, reducing the cost of exit to profitability. Or so my theory goes.

Here’s the chart, IWM at 2:25 p.m., 5-minute bars, with volume:

Screen Shot 2021-02-26 at 11.20.16 AM

Analysis 2/3/2021

I have entered a short iron condor spread on IWM, using options that trade for the last time 44 days hence, on March 19. The premium is a $2.27 credit per contract share and the stock at the time of entry was priced at $212.14.

The implied volatility rank (IVR) stands at 24.2.

Premium: $2.27 Expire OTM
IWM-iron condor Strike Odds Delta
Long 225.00 76.0% 26
Break-even 222.27 71.5% 31
Short 220.00 67.0% 36
Short 188.00 81.0% 16
Break-even 185.27 83.0% 14
Long 183.00 85.0% 12

The premium is 45.4% of the width of the position’s wing.

The profit zone covers a 4.8% move to the upside and a 14.5% move to the downside, for a total range of 19.3%.

The risk/reward ratio is 1.2:1, with maximum risk of $273 and maximum reward of $227 per contract.

Strategy. I set the wings of the iron condor based on Elliott wave analysis of the IWM chart, which shows the January 25 high, $217.91, to be the peak of an uptrend, and the subsequent decline to be the beginning of either a new downtrend. I set the short put, the lower boundary of my profit zone, below the end of wave 1 to the downside, at 203.25 set on January 29. The subsequent upward move is a wave 2 correction.

By Tim Bovee, Portland, Oregon, February 3, 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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