Update 4/19/2022: I exited my short iron condor on WBA 31 days before expiration, for a $1.10 debit per contract/share, a profit before fees of $0.04 per contract. Shares were trading at $45.03, down $2.76 from the entry level.
The Implied Volatility Rank at exit was 24.6%, down 25 points from the entry level.
I exited because the position became immediately unprofitable after earnings were published and shares declined below the profit zone. Rather than retain the position in the hope of profitability, I exited for a minimum profit, freeing up the funds for other trades.
Shares declined by 5.8% over 20 days for a -105% annual rate. The options position produced a 3.6% return for a +66% annual rate.
I have entered a short iron condor on WBA, using options that trade for the last time 51 days hence, on May 20. The premium is a $1.14 credit per contract share and the stock at the time of entry was priced at $47.79.
The Implied Volatility Ratio stood at 49.6%.
The premium is 45.6% of the width of the position’s short/long spreads on both the calls and the puts. The profit zone covers a 9.5% move to the downside and a 7.0% move to the upside, for a total 16.5% profit range.
The risk/reward ratio is 1.2:1, with maximum risk of $136 and maximum reward of $114 per contract.
How I chose the trade. The trade was placed to coincide with WBA’s earnings announcement, before the openng bell on the day after entry. The short strikes were set to coincide with the expected move of $1.97 either way, based on options pricing adjusted for expiration two days away, which gives a price range of $45.79 to $49.73.
By Tim Bovee, Portland, Oregon, March 30, 2022
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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