Issue #203 - Synthetic XBI
Synthetic XBI...
Trades are for educational purposes and not a recommendation or financial advise.
Market Scorecard
Don’t get spooked. Hold your lines guys… Market is about to get more exciting.
Trade Scorecard
SYNTHETIC ON XBI
The SPDR S&P Biotech ETF (XBI) is an equal-weighted ETF that tracks the S&P Biotechnology Select Industry Index. Unlike market-cap-weighted ETFs, XBI gives equal exposure to small, mid, and large biotech stocks. This makes it more volatile compared to other biotech ETFs like IBB, which is more weighted toward large-cap biotech firms.
XBI Price Action Analysis
XBI has been on a downtrend since November 2024.
Today’s Open: XBI crashed more than $2 at the open, indicating heavy selling pressure.
Support at $86: Strong bounce around this level suggests buyers stepping in.
TTM Momentum Indicator: Down momentum has faded, and a slight blue bar indicates the start of upward momentum.
Market Context: If Nasdaq and S&P rally, XBI will likely move higher due to overall market sentiment. Even on a down trend, the price will move down in waves, lower high and lower low. We want to catch the lower high part.
Price Expectation:
If momentum continues, XBI could pop to $90, a psychological resistance level.
Strong market conditions (Nasdaq/S&P green day) would accelerate this move.
If XBI breaks below $86 support, the trade idea is invalid.
Why This Options Structure?
We chose a synthetic long position instead of buying XBI shares for higher leverage with limited risk.
Trade Structure (17 April DTE)
Buy ATM $87 Call → Gives upside exposure.
Sell OTM $83 Put → Lowers the cost and provides a small buffer.
Delta ≈ 80 → Moves almost like owning 80 shares of XBI per contract.
Cost: $130, Buying Power: $1,043 → Cheaper than buying 80 XBI shares directly (~$6,936).
Why This Works for Our Thesis:
✅ High leverage for a quick move.
✅ Risk defined – only lose the premium paid ($130) if XBI drops, but as long it stays above $83 at expiry.
✅ Exit Plan
Take profit when XBI stock price reaches $90.
Cut losses if the trade loses 50% of the debit paid ($65 loss).
This structure maximizes gains if XBI pops while keeping risk manageable.
SUPERBULL ON XOP (UPDATE ISSUE #202)
XOP hit our target price of $130 in just 6 days into the trade. Although maximum profit is reached closer to expiry, we need XOP price to stay above $130 in another 30 days. We decided to take profit as we reached 47% of profit target in less than a week, why risk another 30 days of uncertainty?
XOP is now expected to ease down in price in the next days. We can always watch it closely and reenter another similar trade when price retrace back to $124-$125.
Did you see the momentum indicator in the TTM Squeeze indicator turned from bright purple to light purple and eventually blue? We use this indicator quite often to determine price turnaround. Another tip of the day :D
Trades are for educational purposes and not a recommendation or financial advise.
IBIT Call Ratio (UPDATE ISSUE #198)
The trade has gone to full loss but we learned a lesson on this trade.
Crypto is confirmed a very volatile instrument.
Short duration directional debit trades are very vulnerable
Best structured with protection on the downside and don’t pay too much premium to reduce the risk. Finance the trade using credit strategies like credit put spreads or use debit call spreads to reduce cost.
We still have some June expiry Call Rations, let’s see if it will do better.
Trades are for educational purposes and not a recommendation or financial advise.
STRANGLE ON XBI (UPDATE ISSUE #199)
XBI recovered in price a bit since last week, but it seemed to be holding up with upside momentum building. We are only left with 3 more days and it should stay within the trade range of $83 to $90 for a 100% profit.
Trades are for educational purposes and not a recommendation or financial advise.
STRANGLE ON IBIT (UPDATE ISSUE #200)
The trade is slightly In The Money on the short put side $48 strike against current price of $46.40. If the price of IBIT goes back up closer to the short put strike, we will roll it for another week or 2 at $48 to get more premium. The action is to also protect the position as we feel it might not exactly land out of money by Friday. Probably safer to roll the trade when IBIT price goes up in the next 1-2 days. The trade is at 33% loss at the moment.
Trades are for educational purposes and not a recommendation or financial advise.
IWM STRANGLE (UPDATE ISSUE #201)
IWM is now trading at $202.8. Price recovered slightly from last week and we expect it to continue to recover. But keep a watch on $197 support. If it breaks down it is not good for the trade.
The trade is at 52% profit. If you do not want to wait, it is a good time to take profit. We are keeping the trade as we expect the price to turnaround as shown in the TTM Momentum indicator.
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
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.