XBI Trade

Update 7/27/2021: I exited my short bear call spread position on XBI 24 days before expiration, for a $0.38 debit per contract/share, a profit before fees of $0.92 per contract. Shares were trading at $122.05, down $2.70 from the entry level.

My decision to exit was based on the price reaching more than 50%.of maximum potential profit, as required by my trading rules. The price remained below my short call strike, $34, throughout the life of the position. The entry and exit dates are shown by vertical red lines on the chart, with a horizontal gray line marking short call strike price.

[XBI at 2:15 p.m., 20-minute bars]

Shares declined by 2.2% over nine days for a -65.8% annual rate. The options position produced a 121.1% return for a 3,682% annual rate.


SPDR S&P Biotech ETF (XBI)

Lot 2

I have entered a short bear call spread on XBI, using options that trade for the last time 36 days hence, on August 20. The premium is a $0.84 credit per contract share and the stock at the time of entry was priced at $124.75.

The implied volatility rank (IVR) stands at 30%.

Premium: $0.84 Expire OTM  
XBI-bear call spread Strike Odds Delta
Puts      
Long 140.00 91.0% 11
Break-even 133.16 86.0% 17
Short 134.00 81.0% 23

The premium is 28% of the width of the position’s wing.
The profit zone covers a 6.7% move to the upside.

The risk/reward ratio is 6.1:1, with maximum risk of $516 and maximum reward of $84 per contract.

[XBI, daily bars]

Elliott wave analysis places XBI in a 3rd wave downtrend, and if that analysis holds up, then the price is unlikely to revisit the $134 level, which marks the top of my profit zone.

By Tim Bovee, Portland, Oregon, July 15, 2021

Disclaimer

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.

License

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Based on a work at www.timbovee.com.