Lot 3

iShares China Large-Cap ETF (FXI)

Update 11/11/2021: I exited my short bear call spread position on FXI eight days before expiration, for a $2.05 debit per contract/share, a loss before fees of $1.37 per contract. Shares were trading at $41.37, up $3.78 from the entry level.

The Implied Volatility Rank at exit was 39.1%, down 20.1 points from the entry level.

My decision to exit was based on a sudden reversal of the price to the upside as the expiration date approached, cutting my losses before they grew even larger.

Shares rose by 10.1% over 36 days for a +102% annual rate. The options position produced a 66.8% loss for a -678% annual rate.

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I have entered a short bear call spread on FXI, using options that trade for the last time 44 days hence, on November 19. The premium is a $0.68 credit per contract share and the stock at the time of entry was priced at $37.59.

The Implied Volatility Ratio stands at 59.2%

Premium:	$0.68	Expire OTM
FXI-bear call spread	Strike	Odds	Delta
Calls
Long	42.00	91.0%	11
Break-even	39.68	79.5%	23.5
Short	39.00	68.0%	36

The premium is 45.3% of the width of the positions short/long spread. The profit zone covers a 5.6% move to the upside.

The risk/reward ratio is 3.4:1, with maximum risk of $232 and maximum reward of $68 per contract.

How I chose the trade. FXI has moved below resistance, the low of October 4, in what I count as a 5th wave in the decline that began on September 7. I set the strike price just above the peak of the most recent upward move within the descent. My read of the chart is that FXI is in a downward movement that will take a few weeks to work through.

By Tim Bovee, Portland, Oregon, October 6, 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.