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Weekly Trade – Neutral – SEK (Seek Limited) – Iron Condor

August 19, 2020

Weekly Trade – Neutral – SEK (Seek Limited) – Iron Condor

Our trade of the week is a neutral SEK Iron Condor Trade flagged on Thursday the 13th of August. We have chosen this trade as it meets our quant tested Iron Condor trade criteria scoring 70 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 SEK Iron Condor Trade flagged on Thursday the 13th of August. We have chosen this trade as it meets our quant tested Iron Condor trade criteria scoring 70 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.

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.
  • The 50 Day MA and 200 Day MA are close and favourable.
  • IV Rank is favourable.
  • However, liquidity is poor so there is likely to be a larger spread when entering the trade.

With the stock trading at $19.71 as of 19th of August  we are looking at trading the following strikes:

We’re looking at around a 51.5c credit to enter into this trade. In this example our position will consist of 60 units.

Your best outcome in this trade is for it to expire worthless so you can keep the upfront premium. The theoretical maximum profit is currently $3090, with the theoretical maximum loss $2900. The maximum profit will be achieved if the options expire worthless on the 17th of September 2020 with the SEK stock price closing between the strike prices of the sold call ($20.00) and the sold put ($18.00). If the stock falls below $18.00 the maximum loss will occur at $17.00 (which is the strike price of the protective put), with a breakeven point at $17.49. If the stock rises above $20.00, maximum loss will occur at $21.00 (which is the strike price of the protective call), with a breakeven at $20.51.

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 1300 805 795 .

 

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 first. 

 


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