9/28 – We’ve really tried to fight this one aggressively, and collecting the additional $175 in credit earlier this week didn’t hurt. However, at this point, with FDX at 224, I am going to move on to other trades and close this one out for a $68 loss–20% of the potential max loss of $327. I was able to do this for $416 debit.
To Close the Trade:
- Sell to Close the 10/15 225 Put
- Buy to Close the 10/15 230 Put
- Buy to Close the 10/15 230 Call
- Sell to Close the 10/15 235 Call
9/24 (morning) With FedEx getting very close to our 228 break even, you have a few choices:
1) You can close the entire trade for a small loss.
2) You can do nothing and continue to wait for FDX to go higher.
3) Collect more credit. You can roll the calls down. This is what I chose to do and monitor carefully. For an additional $175 credit I rolled the 270/265 Oct 15 calls down to 235/230 Oct 15 calls. The short calls now converge on the 230 strike. The break-even prices are now between 227.5 and 232.5. Much narrower range, still risk-defined. Watch closely.
9/22 Post Earnings Options Analysis – Stay Put. After Earnings, FDX is down over 9%. It is currently sitting below our 230 put, but our break-even on this trade at expiration is actually closer to 228 so we have 2 points of wiggle room before we begin to lose money. If the trade expired today, we would be up a theoretical $83! FedEx has exceed the the bottom of it’s range and I believe it has a good chance of coming back up. This trade is paying us 60 cents in daily theta decay and has 3 more days until our 21 DTE rule (manage or close at 21 DTE). I believe we not touch this yet and see how the market trades until Friday. At that point, if nothing else, we’ll have an opportunity to roll down the call side for another credit of up to 100$ perhaps based on a rough back of the envelope analysis.
What’s the Trade?
Wilson!!! FedEx has earnings 9/21 at the closing bell. Sell an Iron Condor in FDX before the close for a $173 credit or more. With FDX trading at 250:
- Buy the October 15 225 put
- Sell the October 15 230 put
- Sell the October 15 265 call
- Buy the October 15 270 call
- Premium: Try to collect at least $173
- Rationale: This is a defined risk trade. You can make up to $173 if FDX stays in this range on or before expiration. FDX has an IV Rank of 41% which increases the premium you will collect (higher is better). This trade collects $3.72 in theta decay each day. ReadyFor401K has determined that the 234 and 263 yellow lines are near the prior support and resistance levels. Jerry used these areas to pinpoint the best strikes for this trade.
- Probability of making 86$: 66-70%
- Max Loss: $327
- Assumption: Neutral to slightly bearish
- Timeframe: ~1-3 weeks
