Canopy Growth Corp. (CGC)

Update 4/17/2019: I exited my short iron condor on CGC, 29 days after entering the position and nine days prior to mandatory exit when the options have 21 days left before they expire. The implied volatility at exit was 46. I exited for a $0.62 debit with shares at $42.86.

Shares declined 6.7%, or $3.08. during the holding period, or an 84% annual rate. The options position produced a 117.7% return, $0.73, for a +1,482% annual rate.

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On March 19 I entered a short iron condor spread on CGC, using options that trade for the last time 59 days later, on May 17. The premium is a $1.35 credit and the stock at the time of entry was priced at $45.93

The implied volatility rank (IVR) at entry stood at 47.

Premium:	$1.35	Expire OTM
CGC-iron condor	Strike	Odds	Delta
Long	60.00	91.0%	13
Break-even	56.35	86.5%	18
Short	55.00	82.0%	23
Puts
Short	37.50	76.0%	17
Break-even	33.85	82.0%	12.5
Long	32.50	88.0%	8

The premium is 28% of the width of the position’s wings.

The risk/reward ratio is 2.6:1.

By Tim Bovee, Portland, Oregon, April 17, 2019

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2:35 p.m. New York time

I’ve entered a new position on CGC using options expiring June 21. Analysis to come.

11:05 a.m. New York time

I’ve exited my short iron condor on CGC for $0.62, or 54% of maximum potential profit. Full analysis to come.

By Tim Bovee, Portland, Oregon, April 17, 2019

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5:45 p.m. New York time

No fill on CGC.

11:10 a.m. New York time

I’m making another attempt to exit my iron condor on CGC. The position sunk to a debit of $0.76, which is 43% of maximum potential profit. My goal at or above 50%, and so I set the order bid at $0.67.

DIS, after last week’s large upward gap, is trading at $130, which is above the upside breakeven of $126 but within the wing, which provides some shelter up to $135. With 10 days left until mandatory exit (21 days prior to expiration), I’m happy to let things play out without any adjustment to the position.

By Tim Bovee, Portland, Oregon, April 16, 2019

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1:10 p.m. New York time

No fill on my CGC exit order.

12:05 a.m. New York time

I entered an exit order on CGC, which is at 44% of maximum potential profit. The exit bid is for a $0.67 debit, or 51% of max.

DIS opened 10% higher than the prior day’s close, from $116.60 to $127.91, challenging the upper side of my iron condor, after the company announced the launch date and pricing of its new Disney+ streaming service.

Thanks to the wide profit zone dictated by my new trading rules, the higher open was only $1.91 above the upside breakeven point, suggesting a good chance of recovery back to profitability in the 35 days left before expiration.

Under my rules, I exit 21 days before expiration, which is two weeks from now. In this case, whether I honor that rule or not will depend upon the chart.

I checked out the advisability of adjusting the unchallenged side but judged the challenge to be insufficiently strong to warrant action at this time.

By Tim Bovee, Portland, Oregon, April 12, 2019

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Twilio Inc. (TWLO)

Update 4/26/2019: I exited TWLO profitably with a $1.84 debit, 21 days prior to expiration. The profit was 12% of its maximum potential, far short of my 50% target. The position produced a return of $0.25. Shares closed at $132.31, within the profit range.

Shares rose by 5.2%, or $6.49, over 15 days, a $126% annual rate. The options position produced a 13.6% return for a 331% annual rate.

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I have entered a short iron condor spread on TWLO, using options that trade for the last time 36 days hence, on May 17. The premium is a $2.09 credit and the stock at the time of entry was priced at $125.82.

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iShares MSCI Brazil Capped ETF (EWZ)

Update 4/11/2019: I exited EWZ for a credit of $0.36, or 50.7% of maximum potential profit.

Shares rose by 1.1% over 13 days, or a +31% annual rate. The options position produced a +102.8% yield for a +2,886% annual rate.

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On March 29 I  entered a short iron condor spread on EWZ, using options that trade for the last time 49 days later, on May 17. The premium is a $0.73 credit and the stock at the time of entry was priced at $41.33.

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11:55 a.m. New York time

I’ve entered a short iron condor on TWLO. Analysis to follow.

10:15 a.m. New York time

EWZ exit order filled at $0.36; full analysis to come.

9:40 a.m. New York time

I’ve again entered an exit order for my iron condor on EWZ, at $0.36. See Wednesday’s Live feed.

By Tim Bovee, Portland, Oregon, April 11, 2019

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4:45 p.m. New York time

No fills in my exit orders.

2:35 p.m. New York time

My short iron condor on GDXJ (c+39 c-36 p-30 c+27) has moved to 40% of maximum potential profit at a debit of $0.36, and I’ve put in an exit order at $0.31, 50% of max.

10:45 a.m. New York time

My EWZ position, a short iron condor (c+52 c-46 p-36 p+30), is at 45% of maximum potential profit, with a $0.40 debit, and I’ve entered an exit order at a $0.36 debit, which is 51% of maximum potential profit. No guarantee of a fill, of course.

By Tim Bovee, Portland, Oregon, April 10, 2019

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8 a.m. New York time

All of my holdings have 38 days to go before expiration, and 17 days before my mandatory exit date, 21 days prior to expiration. At this points it’s a game of waiting for theta, the erosion time enacts on all option prices, to bring my cost of exit down to the lowest possible level.

By Tim Bovee, Portland, Oregon, April 9, 2019

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The Walt Disney Co. (DIS)

Update 4/29/2019:  I exited DIS today for a disastrous $8.50 debit, more than eight times the entry premium credit. The stock price gapped up nearly 10%, from $116.60 to $127.91, after Disney announced details of its planned streaming channel. It never fell back.

Shares were trading at $139.72 at the exit, up $24.95. The debit was $7.50 below the entry credit.

Shares rose by 21.7% over 24 days, or a +331% annual rate. The options position produced an 88.2% loss for a -1,342% annual rate.

So, disastrous for this month’s bottom line? Yes. End of the world? Of course not. This is why I do trade sizing, to avoid the possibility that single trade could cause me harm. Like the wise old trader said, “Don’t risk money you can’t afford to lose.”

Take-aways: This was a middling IV range on a well publicized stock. I mean, everyone knows Disney. The earnings announcement was about a month away. However, I knew at entry that the company was rolling out its streaming service. I knew it would be an impact; I underestimated how large it would be. 

Trading exchange-traded funds, which provide diversity, is one way of avoiding such unpleasant surprises. Trading less visible companies (i.e., not tech and not entertainment) is another way to mitigate the effect. The risk/reward ratio — 9:1 — magnified the loss, so ensuring a lower ratio would mitigate.

And probably the best way is to accept it as the cost of doing business. I may have a 90% chance of closing profitably on the upside, as I did with this position, but that remaining 10% is a real risk. As the wise old trader also said, “Young fella, 10 percent ain’t peanuts.”

Onward!

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I have entered a short iron condor spread on DIS, using options that trade for the last time 42 days hence, on May 17. The premium is a $1.00 credit and the stock at the time of entry was priced at $114.77

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