Update on Put Strategies

Table below is tracking the open Iron Condors (IC), Bull Put Spreads (BuPS) and Diagonal Bull Put Spreads (DiagBuPS). So far the combination of put strategies is generating a profit of $5,231. We have $135,300 of capital “reserved” against the positions. Return on Capital is 3.87% in less than a month. The Diagonal Put Spreads are showing a loss…not unexpected as the goal is to write additional Put options against the base position over the next several months. Not included are a couple of adjustments. The initial IC on ABT was too “tight” (difference between the strike price of the short put and short call). We closed the position and established a new one with more width. We also reduced the size if the position from 30 contracts to 10…..we don’t have enough experience for IC with 30 contracts. The position was closed for a $1,200 profit that is not included. We made similar adjustments to the DXCM and SPY positions (wider width) at minimal cost.

It has been challenging to achieve the “tasty trade” recommendation of generating premium = 1/3 of the width between the strike prices (example long put at $110 and short put at $115 …..$5 spread x 1/3).

Unfortunately it is very time consuming to track the strategies. The download from Schwab does not include the “strategy” information even though Schwab do include it in the online account summary information. Downloaded historical and current information needs to be put in a table and queried. Over time I hope to figure out a more efficient way to track the individual strategies. Recommendations are welcome!

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…….

Iron Condor on SPY, Mar 31 363/383 394/414, net credit $10.35

Yesterday we opened our first position trading the SPY (ETF or electronic traded fund that tracks the S&P 500).

We established an Iron Condor with the positions in the table below. We received a credit of $5,176.62 (maximum profit potential. Maximum loss is the spread between the strike prices of the wings ($20) x 500 shares – credit received = $4,823.

SPY can go up or down….key is staying between the short put strike price of $383 and the short call strike price of $394. SPY was at 389 when we set up the trade.

CHWY Iron Condor Mar 19 $75/$95, $125/$145 Net credit $5.29

Executed a trade today based on a Tastytrade.com recommendation. If you are not familiar with Tastytrade.com I highly recommend you visit the site. I think it is the best web site for learning about options and trading strategies. Today they had a recommendation for an Iron Condor on CHWY. We followed the recommendation but modified the “wings” a bit. Stock was trading at $109 when our trade executed (table below).

Our goal is for the price of CHWY to remain between the strike price of the short put $95 and the strike price of the short call ($125) on Mar 19. Maximum potential profit is $2,646.72 in 31 days (credit received when we established the position). Tastytrade recommend exiting if you hit 50% of max profit or $1,323. Maximum potential loss is $7,353 ($20 spread on put/call strike prices x 500 shares – premium received).

I am looking to gain experience with Iron Condors so this will be ” hands on” learning.