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2019 Trades

xlb: 08.23.19 – 09.09.19

ETF | Materials/Chemicals Fund | Status: Closed

Opening Trade

08.23.19
This trade is an experiment. Normally, I like to place my trades with 45 days to
Right now we are in an awkward middle ground where the
is about 30 days out, and the
is about 60 days out. One is barely too short, and the other is barely too long. Secondly, with
as erratic as it's been,
risk plays a much bigger role than it has all year...
My strategy is essentially a
where I sell the front month 16-20
and the back month 25-30 delta
In the event of continued volatility expansion, the front-month put shouldn't be as affected by vega as it would be in the back month. If it gets tested, I'll hopefully be able to
for heightened
before it becomes necessary to
This would allow me to retain my buffer to the upside. On the flip-side, if the call is tested, I'll be hedged more effectively by volatility contraction due to heavier back-month vega. I can then roll my put out and up if necessary.
I'm calling this strategy "Sea Legs." Sea, as in C for calendarized legs, but also because it takes advantage of turbulent markets... like trying to stand on a ship in turbulent waters. XX
I collected a total of $1.07 in premium for this position. My target is 50% of max profit, which is about $0.53. The passage of time and volatility contraction should benefit this position greatly.

Risk Profile:

(Not to scale)
Figure 1

Strategy: Short 52/58 Sea Legs

sto 1 sep 20 52 put
sto 1 oct 18 58 call
Fill Price: $1.07 credit

Position Analysis

U/L Price: $55.30
IV: 24.5/23.4%
IVR: 43.0
Liquidity: 3/4
Position: Short 52/58 Sea Legs
POP: ≈70%
Cost Basis: $1.07
Risk: Undefined
BPR: $840
Max Profit: $1.07
Max Loss: Unlimited
Target P/L: $0.53
Break Even(s): $50.93, $59.07
Extrinsic Value: $107.00
Net Delta: -5.12
Net Theta: 3.132

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2019 Trades
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