Update 12/17/2021: I exited my short iron condor spread position on FDX 35 days before expiration and one day after the company published earnings, for a $3.35 debit per contract/share, a profit before fees of $65 per contract. Shares were trading at $251.18, up $10.35 from the entry level.
The Implied Volatility Rank at exit was 43.3%, down 44.8 points from the entry level.
After earnings were published after the closing bell on December 16, the share price rose to $259.50, dropped, and then rose further to $260.50, both above the expected move upside target of $256.75. The price declined somewhat during the day prior to my exit, improving the profit of the position.
Shares rose by 4.3% over one day for a 1,569% annual rate. The options position produced a 19.4% return for a 7,082% annual rate.
I have entered a short iron condor spread on FDX, using options that trade for the last time 36 days hence, on January 21. The premium is a $4.00 credit per contract share and the stock at the time of entry was priced at $240.83.
The Implied Volatility Ratio stands at 88.1%
The premium is 40% of the width of the positions short/long spread. The profit zone covers a 9.6% move to the upside and a 12.5% move to the downside, for total coverage of 22.2%.
The risk/reward ratio is 1.5:1, with maximum risk of $600 and maximum reward of $400 per contract.
How I chose the the trade. The position is timed to coincide with FDX’s publication of earnings after the closing bell and covers the expected move after that announcement, as inferred from the pricing of options expiring on December 17. The expected move would keep the price between $226.35 and $256.75.
By Tim Bovee, Portland, Oregon, December 16, 2021
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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