Update on Iron Condor Learning/Strategy, Shutdown IC on MU today

One bright spot on a tough market day was closing the Iron Condor on MU. Details on the transaction are below. Profit of $3,360, a Return on Capital of 22% in 27 days, 83% Annualized. This is a much better return than I have been achieving trying to capture dividends over the past couple of weeks!

We followed the Tastytrade.com recommendations when we set up (51 Days to Expiration) and closed the trade (21 Days to Expiration or 50% of max profit….we closed it based on exceeding profit goal). We have a series of IC’s coming due over the next week…..but this will likely be the most successful. This is one of the few IC’s where we were able to get a credit equal to 1/3 of the width between the strikes ($10 width, $3.36 credit). The volume on MU options is high which helped with both the entry and exit. Other IC’s I have are more challenging to exit due to the wide spread between the bid and ask prices. The IC’s are above the 50% profit target but I can’t get filled and remain above the target. I may have to hold them through expiration.

Iron Condor (IC) on ABT, DXCM

Our IC on ABT lost money this week as ABT stock increased in value. The table below shows the current status (ignore the -15 ABT 02/19/2021 $127 Calls as they are part of a covered call).

The “wings” of our IC include a call spread of $125/$135 (10 point spread) on the upper side and put spread $110/$120 (10 point spread) on the lower side. When we established the IC we received $13,255 in premium for selling the two spreads.

Max Profit = Premium Received.

Max Loss = Spread between the wings (10) * #contracts (30) * 100 shares per contract – Premium Received = $16,745.

Current stock price of $128.23 is above the lower strike on our call spread.

To realize max profit we need ABT to be between $120 and $125. When we set up the IC it seemed like a reasonable assumption. In hindsight I should have used a wider range. A wider range would have reduced the premium received (Max Profit) but increased the probability of the stock remaining inside the range. Position is currently losing $1,225.

The position has a lot of time left (expires March 19) and ABT may drop back. If the price goes above $135 we will incur the maximum loss. We do have an option of rolling up the Put from $120 to $125 which would generate additional premium and reduce the maximum loss.

Yesterday I established a new IC on DXCM following the earnings announcement. Took the lesson learned about wider range. The options in the table below with the quantity 20 and -20 make up the IC. The spread between the put spread ($360) and call spread ($460) is much wider than what we did on ABT IC. The stock has a $100 range to move and allow us to make maximum profit. Our Max profit is the sum of the premiums received ($15,680). Max Loss is the spread of the wings (20) x number of contracts (20) x 100 shares per contract – Premium Received = $24,320. Current profit is $1,340…….