Update 1/3/2022: I exited my short iron condor position on NKE 18 days before expiration, for a $1.95 debit per contract/share, a profit before fees of $80 per contract. Shares were trading at $164.66, up $8.11 from the entry level.
The Implied Volatility Rank at exit was 21.9%, down 77 points from the entry level.
I exited because the position became profitable within 21 days of expiration, on the theory that if an unprofitable position becomes profitable that close to the end of the options’ lifespan, then best to grab the money and run.
Shares rose by 5.2% over 14 days for a 135% annual rate. The options position produced a 20.5% return for a 535% annual rate.
I have entered a short iron condor spread on NKE, using options that trade for the last time 32 days hence, on January 21. The premium is a $2.35 credit per contract share and the stock at the time of entry was priced at $156.55.
The Implied Volatility Ratio stands at 98.9%
The premium is 47% of the width of the positions short/long spread. The profit zone covers a 6.9% move to the upside and a 10.0% move to the downside.
The risk/reward ratio is 1.1:1, with maximum risk of $265 and maximum reward of $235 per contract.
How I chose the trade. The trade was placed to coincide with NKE’s earnings announcement, after the opening bell on the day of entry. The short strikes were set to coincided with the expected move of $9.36 either way, based on options pricing, which gives a price range of 146.48 to 165.20.
By Tim Bovee, Portland, Oregon, December 20, 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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