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Trade Of The Week: Neutral – AMC – Iron Condor

January 22, 2020

January 22, 2020

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Trade Of The Week: Neutral – AMC – Iron Condor

Our trade of the week is a neutral AMC Iron Condor Trade. We have chosen this trade as it meets our quant tested Iron Condor trade criteria scoring 74 points which currently makes it a ‘Bronze’ level trade. 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.

Our trade of the week is a neutral AMC Iron Condor Trade. We have chosen this trade as it meets our quant tested Iron Condor trade criteria scoring 74 points which currently makes it a ‘Bronze’ level trade. 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.

In the low volatility environment, there haven’t been a lot of iron condors, but here are some of the 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.
  • AMC has mostly been trading within a range of $14.90 and $16.00 since late November.
  • IV Rank is favourable.
  • Liquidity is OK.

With the stock currently trading at $15.71 we are looking at trading the following strikes:

At the close of trading today we’re looking at around a 22.5c credit to enter into this trade.

Your best outcome in this trade is for both legs to expire worthless so you can keep the upfront premium. The theoretical maximum profit is currently $2565, with the theoretical maximum loss $3135. The maximum profit will be achieved if the options expire worthless on the 27th of February 2020 with the AMC stock price closing between the strike prices of the sold call and the sold put. If the stock falls below $15.00 the maximum loss will occur at $14.50 (which is the strike price of the protective put), with a breakeven point at $14.78. If the stock rises above $16.00, maximum loss will occur at $16.50 (which is the strike price of the protective call), with a breakeven at $16.23.


If you would like get access to all of our trade ideas, you can do so through our Implied Volatility trading platform.Click here for a seven-day trial.

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.

 

Past returns do not reflect future returns. 

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. If you are thinking about acquiring a financial product, you should consult our Financial Services Guide (FSG) at www.reachmarkets.com.au and the relevant Product Disclosure Statement first. 

 


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