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New STX Jul28 Iron Condor (ROTH IRA)

UPDATE: July 12, 2017
 

Great! I just found that STX will be reporting on July 25th instead of August 2nd as was indicated in my broker’s platform. So, now this trade is a total different story as I will now be holding through earnings and I could get busted should the stock move violently up or down.

 

ORIGINAL TRADE: July 10, 2017
 

STX is reporting earnings on 08/02 and I decided to open a trade which should end before earnings, so this trade will end before the report and I will not be holding it through the earnings. Well, at least this is the plan and I hope it will all go according to the plan.
 

For tomorrow morning, I am placing the following trade:

 
BTO 1 STX Jul28 44.00 call
STO 1 STX Jul28 42.00 call
STO 1 STX Jul28 35.00 put
BTO 1 STX Jul28 33.00 put

 

@ 0.26 credit limit
 

Below see the picture of the trade:
 

STX Iron Condor
 

Why July 28 expiration?
 

  • As I mentioned above, the company reports earnings on August 2nd and I want this trade to hopefully end before expiration. Also I selected 17 days to expiration to be able to go further away from the money and collect a decent credit.
     

How did I choose the short strikes?
 

  • When I trade conservative trades I use expected move. TOS shows you the expected move for every expiration (and if your platform doesn’t, it can be calculated) in the upper right corner of each option chain expiration. For July 28th the expected move is +/- $2.753 dollars each direction. That means that the stock may fall by $2.753 or go up by $2.753 by July 28th. It is not a 100% guarantee, but there is a chance that it may happen. Most of the time the stock stays within this range, so if you choose your strikes out of this range, you would be playing a safer bet.
  • In this trade, I rounded the expected move to $3 dollars and then subtracted from the current price of $38.39 a share to get the short put strike and added it to the recent price to get the call short strike.

 

Why $2 spread width?
 

  • I chose this arbitrarily as I wanted to limit my cash at risk to $200 dollars only, therefore I choose $2 dollars wide spread.

 
How will I be managing this trade?
 

  • Since there is a chance that tomorrow morning this trade opens for only 0.26 credit (the range for the trade was 0.17 to 0.34 credit but I moved the slider to the center which is what the trade is likely to get executed) I plan on not to be buying those legs back and let them expire. If I see the stock moving too close to one or the other side, I may choose to close the opposite short leg for 0.02 debit so I can roll the endangered side higher or convert it.
     
     




2 responses to “New STX Jul28 Iron Condor (ROTH IRA)”

  1. Rujing Ming says:

    Today’s closing price $38.32 is very close to the price you mentioned ($38.39) on 7/10, but both call prices and put prices increased a lot, making expected move much higher. Is this because of the higher IV? I followed your trade, but have no worries.

    • Martin says:

      Yes it is because of IV which spiked up as the earnings is coming. I thought earnings would be in August not July which makes this trade a bit complicated as yes, the earnings may now move the stock beyond the original expected move. It wouldn’t happen if the trade would have ended before earnings and not after.

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