Symbols traded today: IBM (17DTE), SPY (9DTE)

I entered two options positions today, using different strategies on each for different purposes.

The first, a short Iron Condor on IBM, is in response to the compan’s earnings announcement, on January 24 after the closing bell. I’ve positioned the short legs of the trade at a bit beyond the expected move, based on the options pricing. I chose the duration as a way of being close to enough to expiration to benefit from a rapid decline in implied volatility, and far enough away to have time for the price to reverse the whipsaw often seen after an event-driven price movement

The second, short bull put Vertical spread on SPY, based on my Elliott Wave Theory analysis of the S&P 500 chart, which shows price to be in a small-sized, largely sideways 4th wave downward correction that will be followed by a trending 5th wave push to the upside. I chose the short put strike based on the expected move, as indicated by the options pricing. The 9DTE duration has been shown, by a study conducted by the brokerage TastyTrade, to be less prone to event-driven spikes than other durations. The implied volatility is low, and that’s not exactly a good thing for this trading strategy. On the other hand, it’s SPY, which is based on the S&P 500, which I analyze every day the market is open. So, I’m going with it. Also, the risk/reward ratio is overly high. Because of the Elliott Wave analysis, I’m fairly sure it won’t come into play.

I exited SPY the next day at 54.6% of maximum potential profit. My goal for trades of this type is 50% of max.

IBM short Iron Condor

LOT:

1

ENTRY DATE:

1/23/2024

Entry and Exit

METRIC	CREDIT
Options premium	$ 1.39
METRIC	ENTRY
Stock price	$ 173.46
Impllied Volatility Rate	65.4
Days to expiration	9

The structure of the position

STRUCTURE	STRIKE	ODDS EXPIRE OTM	DELTA	IN PRICE
Calls
Long	187.50	91.0%	10	$ (0.43)
Break-even	183.89	86.5%	14.5
Short	182.50	82.0%	19	$ 1.06
Puts
Short	165.00	77.0%	11	$ 1.33
Break-even	161.39	83.0%	10.5
Long	160.00	89.0%	10	$ (0.57)

Risk and Reward

Per contract:
Reward	139.00
Risk	361.00
R/R Ratio (n:1)	2.6

---

SPY short Iron Condor

LOT:	4	ENTRY DATE:	1/23/2024
		EXIT DATE:	1/24/2024
		DAYS HELD:	1

Entry and Exit

METRIC	CREDIT (ENTRY)	DEBIT (EXIT)	CHANGE	CHANGE %	ANNUALIZED CHANGE %
Options premium	$ 1.00	$ 0.49	$ 0.51	104.1%	37782%
	ENTRY	EXIT	CHANGE	CHANGE %	ANNUALIZED CHANGE %
Stock price	$ 483.92	$ 487.58	$ 3.66	0.8%	276%
Implied Volatility Rate	6.2	4.0	-2.2
Days to expiration	9	8	-1

The structure of the position

STRUCTURE	STRIKE	ODDS EXPIRE OTM	DELTA	IN PRICE	OUT PRICE	NET PRICE
Puts
Long	474.00	86.0%	14	-0.71	0.32	$ (0.39)
Break-even	481.00	78.0%	22.5
Short	480.00	70.0%	31	1.71	-0.81	$ 0.90
						======
					NET TOTAL:	0.51

Risk and Reward

Per contract:
Reward	108.00
Risk	708.00
R/R Ratio (n:1)	6.6

By Tim Bovee, Portland, Oregon, January 23-24, 2024

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

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.