Issue #196 - Take Profits IWM & XOP Strangles
Take profits on the IWM and XOP Strangles...
No new entries this week as too many Executive Orders are coming out from Trum
Trades are for educational purposes and not a recommendation or financial advise.
Scorecard
All up for the week.
STRANGLE ON IWM (UPDATE)
IWM is now back into profitability and almost reach 50% of profit target. You can set a GTC exit order at 50% of premium earned or continue to hold the trade, both should be fine. However, please note that many executive orders are coming out after Trump took office and some may be bullish for IWM and price may continue to rally up in the next days… nevertheless, we should still be at the safe side as it is already 6 days of rally up…any further rally up may result in overbought situation and hit resistance at 242 levels, our upper call strike…
STRANGLE ON XOP (UPDATE)
Another good week for XOP trade. Although price continued to go higher after entry, the trade was becoming profitable as the IV has reduced. Reduction in IV results in cheaper option pricing hence the premium has decayed from entry price.
When we entered the trade IV Rank was 38 and today it is around 12. Hence, when selling options sell when IV Rank is high, generally we take trades with IV Rank of 20 and above. You can check historical patterns of IVR for stocks as different stock can carry different historical IVR trends.
Price action wise, XOP is coming down after topping before Trump took office. The first few executive orders were “Drill Baby Drill” which resulted in oil price dropping due to possibility of increase supply from US oilfields… Further drop in XOP prices may once again increase back the IV, so taking profits now is good as we have reached 58% profits in only 9 days into trade.
Trades are for educational purposes and not a recommendation or financial advise.
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
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