News

Trade of the Week – NCM – Iron Condor

March 16, 2022

Trade of the Week – NCM – Iron Condor

Our trade of the week is a neutral NCM Iron Condor Trade that has been flagged by our trading scanners. It is a ‘gold’ iron condor, scoring 84 points. Options over this stock are fetching a relatively high premium due to its high IV rank (currently at 81) .

Our trade of the week is a neutral NCM Iron Condor Trade that has been flagged by our trading scanners. It is a ‘gold’ iron condor, scoring 84 points. Options over this stock are fetching a relatively high premium due to its high IV rank (currently at 81) . It also is experiencing price action in the middle of its trading range over the past year. Current macro events and market uncertainty has seen an increase in the gold spot and futures price between the 23rd February and 8th March, however buying pressure has eased over the past week.

Source: Implied Volatility

Here are some other key facts that have contributed to this trade idea:

  • We are looking to enter the position close to 45 days to expiry (currently 36 DTE).
  • The 50 Day MA and 200 Day MA are close and favourable.
  • NCM has mostly been trading within a range of $22.50 and $28.50 since late November.
  • IV Rank is favourable at 81.
  • The stock has good market maker coverage.

Traders use the Iron Condor strategy to generate income in sideways markets by selling the Implied Volatility that is priced into the options and allowing time decay to erode the value of the sold legs, making them cheaper to buy back later, or ideally, allowing them to expire worthless.

With the stock currently trading at $26.00 we are looking at trading the following strikes:

Source: Implied Volatility

At the close of trading today we’re looking at around a 63c credit to enter into this trade.

Maximum profit is achieved if both legs expire worthless, meaning you keep the upfront premium received for entering the trade. The theoretical maximum profit is currently $390 with the theoretical maximum loss $510. The maximum profit will be achieved if the options expire worthless on the 21st April 2022 with the NCM stock price closing between the strike prices of the sold call and the sold put. If the stock falls below $24.50 the maximum loss will occur at $23.00 (which is the strike price of the protective put), with a breakeven point at $23.85. If the stock rises above $27.50, maximum loss will occur at $29.00 (which is the strike price of the protective call), with a breakeven at $28.15.

For further information on using the Implied Volatility platform you can follow this link, here.

To try trading for yourself using the most powerful Options Trading technology in Australia, click here for a trial for our Implied Volatility platform

We wish you good luck with your trading, and as always if you have any questions, please feel free to contact our trading desk on (03) 8080 5795. Please note, we provide General Advice only. 

Past performance is not a reliable indicator of future performance. 

The opinions expressed in this article are our personal views. 

Trading options is not suitable for everyone. There is a risk that you can lose more than the value of a trade or its underlying assets. You should only trade if you are confident that you fully understand what you are doing. From 5 October 2021, under Design and Distribution Obligations, anyone opening a trading account will be required to meet the Target Market Determination criteria of Phillip Capital and subject to an assessment the results of which will determine your eligibility for a trading account, for further information please see here.

If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.

Any advice provided by *Reach including on its website and by its representatives is general advice only and does not consider your personal objectives, financial situation or needs, and you should consider whether it’s appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. Please click here https://reachmarkets.com.au/general-advice-warning/ to read our full general advice warning.


General Advice Warning

Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.

Live Investor Briefing

Discover the key projects shaping the iron ore industry

Leave a comment