Options strategy for a consolidating S&P 500 index

0
5


Background


The US markets have been rocked with geopolitical uncertainty this week, with the S&P 500 down more than 1.5% in the last two trading sessions. As stock prices drop, investors look for protection which often means buying/selling options on their holdings. A surge in demand for options typically lifts the premium, and this is what we have seen in the last few days. 

 S&P 500 E-mini options

Such an environment provides a good opportunity to enter an iron condor (short calls spread + short put spread) and collect premium in a risk-defined way.

In addition to the elevated premium, the iron condor will take advantage of any consolidation that may take place. The short spreads are 120 points apart.

Source: Saxo Bank

Management and risk description


The potential for profit and loss are limited with an iron condor. Adhere to money management rules based on your account size. 

* European style options, no fees included

Parameters

Underlying: S&P 500 Index (SPX) Options

Status: opening

Trade: Sell -1 Iron Condor SPX 100 (Weekly) 22 SEP 17 2485/2490/2365/2360 at 2.05 or better

Max Gain: 2.05 or $205 per contract (at expiration)

Max Loss: 2.95 or $295 (at expiration)

ROR: 70%

Entry: today (using multi-leg ticket)

Source: Saxo Bank

Stop: no stop, will provide updates as needed

Target: underlying price to end between short strike prices

Time horizon: 20-25 days

— Edited by John Acher

Non-independent investment research disclaimer applies. Read more
A compiled overview of Trade Views provided on TradingFloor.com is found here



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here