Union Pacific Corp. (UNP)

Update 2/1/2022: I exited my short iron condor position on UNP, 17 days before expiration, for a $1.71 debit per contract/share, a profit before fees of $14 per contract. Shares were trading at $245.34, up $5.76 from the entry level.

The Implied Volatility Rank at exit was 30.3, down 26.3 points from the entry level.

I exited because the position reached profitability with fewer than 21 days left before expiration, my normal practice for exiting positions that haven’t reached 25% of maximum potential profit.

Shares declined by 2.4% over 13 days for a +68% annual rate. The options position produced an 8.2% return for a +230% annual rate.

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I have entered a short iron condor spread on UNP, using options that trade for the last time #30 days hence, on February 18. The premium is a $1.85 credit per contract share and the stock at the time of entry was priced at $239.58.

The Implied Volatility Ratio stands at 56.6%

Premium:	$1.85	Expire OTM
UNP-iron condor	Strike	Odds	Delta
Calls
Long	255.00	90.0%	13
Break-even	251.85	84.5%	18.5
Short	250.00	79.0%	24
Puts
Short	225.00	73.0%	25
Break-even	221.85	76.0%	21.5
Long	220.00	79.0%	18

The premium is 37% of the width of the positions short/long spreads. The profit zone covers a 5.1% move to the upside and an 8.0% move to the downside.

The risk/reward ratio is 1.7:1, with maximum risk of $315 and maximum reward of $185 per contract.

How I chose the trade. The trade was placed to coincide with UNP’s earnings announcement, before the opening bell on the day after entry. The short strikes were set to coincide with the expected move of $11.73 either way, based on options pricing, which gives a price range of $227.30 to $250.76.

By Tim Bovee, Portland, Oregon, January 19, 2022

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.

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Based on a work at www.timbovee.com.