Issue #194 - Strangle on IWM
2025 Lets Trade ...
2025 Lets Trade…
2025 is here and we will be changing the content to more trade related. Market’s going to be choppy but we can trade both ways and even non-directional. Keeping it short also direct to the trades. If you are learning, follow our earlier newsletters especially those below issue #75, those contents are most valuable for learners.
Trades are for educational purposes and not a recommendation or financial advise.
Scorecard
STRANGLE ON IWM
IWM is trading now at $224.52. It has dropped from its high of $244.98 on 25 November, around 8% down. It has recovered a bit since mid December. The previous high should form a resistance and to go down another 10% would bring it down to $204, we take this as another lower support line. We will trade IWM within this 8-10% security barrier to upper and lower side. We need IWM to stay within the strike zones to be profitable. This is a credit strategy, where we earn premium with time into the trade.
To learn about the Strangle Strategy go to here. It’s a third party resource but great learning stuff there.
Trade Setup (expiry 21 Feb)
Go to the 16 Delta strikes at the Options Chain. For now, we see it as 208 short put and 242 Short Call. Prices may change on opening, so just adjust to the 16 Delta strikes.
Sell Put $208
Sell Call $242
Credit received ~ $2.85, buying power $2800
Probability of Profit = 72%
Probability of 50% profit = 87% [credit received 50% of $2.85]
DTE = 46 days
Max loss - unlimited mainly on the short call side, if it goes ITM above strike $242.
Trade Management
For now, price is around center of resistance and support levels. If it goes anywhere near those levels in the next 21 days, watch if price actions slows down to either side direction. If it does, it’s good for the trade and you can keep the trade longer. If it doesn’t consider rolling the tested side (the side where price is being breached) in time. Don’t worry, we will follow through if any action needed.
DISCLOSURES
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
MYstyework is an Online Financial Literacy Educator and materials provided is solely by MYstylework and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. MYstylework, through its contents, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. MYstylework is not in the business of transacting securities trades or an investment adviser.