Posts Tagged ‘Iron Condor’
Well, March was an eventful month. We had the world’s third-biggest economy suffer a massive earthquake and tsunami followed by an ongoing nuclear emergency. If that was not enough, the massive unrest in the Middle East has continued to spread. NATO is bombing the Libyan Army currently.
Finally, the problem children of Europe are seeing the CDS on their debt spike to new highs. We got an initial sell-off, but since Japan has seemed to stabilize, the SPDR S&P 500 ETF (SPY) is now higher than it was on March 11 – the day of the earthquake, and within spitting distance of its February highs. Likewise, after a quick spike in the CBOE Market Volatility Index (VIX), we are now back to a VIX reading around 18. (more…)
Tags: Advanced Options Strategies, CBOE Market Volatility Index, Collars, Diversification, Hedging, Iron Condor, Options Strategies, options trading, Protective Puts, Stock Replacement, VIX
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Thursday, January 13th, 2011
Iron condor spreads are option-trading strategies combining two credit spreads (one bull put spread, one bear call spread) into a four-legged strategy with limited reward and limited risk. Largely because of their finite risk, iron condors are popular among investors seeking investing alternatives for range-bound stocks or indexes. Potential reward and potential risk aren’t the only factors that are limited in this strategy; generally the investor is anticipating limited movement in the underlying as well.
Typically speaking, the two calls and two puts in an iron condor are on the same underlying security with the same expiration month. Investors most commonly use iron condors to collect premium by selling a bull put spread and simultaneously selling a bear call spread, netting a credit on both sides of the transaction.
Join us next Tuesday for our next edition of our Two Traders, One Strategy webinar series, which will focus on the iron-condor strategy. Join Bill Sullivan and Steve Claussen as they highlight the pros and cons of the iron condor trade.
Primary Applications:
- Investors who think the underlying stock will trade in a range between now and expiration might invest in this strategy. The out-of-the-money (OTM) call option and OTM put option act as hedges in case the stock price moves either sharply higher or sharply lower, respectively.
- Investors might use this strategy to sell implied volatility on the underlying, if they expect volatility to come in during the life of the spread. (more…)
Tags: Iron Condor, Option Trading, Options Strategies
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Friday, January 7th, 2011
As Intel (NASDAQ:INTC) approaches its earnings report next week, analysts are taking stock of their stake in the semiconductor. Piper Jaffray downgraded the stock to neutral from overweight earlier this week, setting a 12-month price target of $21.50. This doesn’t represent much upside for the shares.
The stock was virtually flat in 2010, drastically underperforming the tech sector and the broad market, but earnings have been largely positive. According to Briefing.com, INTC has surprised to the upside in seven of the past eight reporting periods. Analysts are expecting per-share results of 53 cents for the January 13 post-market report; this would be a 33% improvement from year-ago figures.
The chart shows a consolidating stock despite strong earnings – what is an investor to do? One of the potential advantages heralded by option traders is the ability to customize a strategy beyond buy-sell-hold. There are neutral option strategies investors can use when the market (or a particular stock) is expected to move sideways. For more information on neutral strategies for a range-bound market, check out our free three-part webinar series beginning on Tuesday (1/11) after the close. (more…)
Tags: Bear Call Spread, INTC, Intel, Iron Condor, Options Strategies
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Wednesday, December 8th, 2010
Amazon.com (NASDAQ:AMZN) is in the business of selling Kindle e-readers, books, housewares, and just about everything in between (including the kitchen sink). In addition to its peddling of tangible goods, the retailing giant also generates revenue through credit-card services and marketing agreements.
The online business has dominated the e-business space for years, and this has been reflected in the share price. AMZN shares have gained more than 250% in the past five years and are up roughly 30% on a year-to-date basis.
Earlier this week, Credit Suisse upped its price target on the shares to $165 from $145 while maintaining a “neutral” rating on the stock. Perhaps the firm was playing a bit of catch-up with the stock bearing down on the $180 level. In a note to clients, Credit Suisse noted that Amazon has a strong gross and operation margins outlook. (more…)
Tags: Amazon.com, AMZN, Cash-Secured Put, Iron Condor, Option Strategies
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Wednesday, December 1st, 2010
As one step of the trading process, some traders will take a meticulous deep dive into chart patterns (and accompanying technical indicators) before opening any new positions. Others dismiss all technical analysis as irrelevant or even nonexistent. What makes one intangible “line” (a moving average, for example) any more important than another?
Regardless of your opinion on moving averages, RSI, MACD, oscillators, or other technically-based indicators, it’s never a bad idea to look at a price chart or two when planning your next trade. Price charts can offer a helpful frame of reference for your stock or option trading. (more…)
Tags: Iron Condor, Online Trading Platform, Options Brokerages, Technical Analysis
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Wednesday, November 24th, 2010
The seemingly unstoppable force which is Netflix (NASDAQ:NFLX) continued higher on Tuesday even while the broader market reversed sharply lower in early trading. Yesterday, the company launched a streaming-only video subscription plan and upped the prices for its DVD mail delivery plans. These business decisions were received well on Wall Street and the stock easily cruised to a new all-time high. In fact, Oprah declared Netflix as one of her favorite holiday things!
NFLX is up almost 250% in 2010 and is higher by roughly 570% in the past five years. There are typically two schools of thought when it comes to a powerfully trending stock such as NFLX. One follows the “trend is your friend” mantra and believes an outperforming stock can continue to power higher until there is a palpable fundamental shift. (more…)
Tags: Bull Call Spread, Iron Condor, Netflix, NFLX, Options Strategies, options trading
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Monday, October 4th, 2010
Earlier this week, FedEx (NYSE:FDX) said it would raise prices by an average of 3.9% beginning January 3 (allowing those holiday packages to go out at the old rate, just under the wire). This could be bad news for companies who pay a lot of shipping costs but will help FedEx offset rising fuel costs. The company’s fuel bill rose 33% over the last year to $887 million.
The price increase was inevitable and probably expected; main competitor United Parcel Service (NYSE:UPS) nudged its own rates higher by 4.9% last year. On one hand, these price increases show some confidence in the health of the shipping business. And shipping is seen as a proxy for the overall economy; the more packages shipped, the more goods produced and sold (or so goes the theory). (more…)
Tags: Bull Call Spread, FDX, FedEx, Iron Condor, Option Strategies
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Monday, August 16th, 2010
Netflix (NASDAQ:NFLX) endured a bit of a setback in the days following its July 21 earnings announcement. The stock tumbled nearly 23% from peak to valley in just eight days and breached the 100 mark. Since August began, however, that downward pressure is only a distant memory. The shares have surged almost 40% from their July 29 bottom and hit a new all-time high of $134.37 intraday Friday.
The stock’s solid uptrend has transpired in the past week despite negative overall market tape. Despite this strength, however the covering analyst with Wedbush reiterated an “underperform” rating this week. He also nudged his 12-month price target higher by a dollar to $78, which still represents more than 40% of potential downside in the shares.
According to the OptionsHouse Research tab, just eight of the 29 analysts following the stock have named it a buy or an outperform. There is clearly skepticism surrounding the shares despite their seemingly indefatigable trend.
We’ve outlined two potential option strategies here – a long call for those who think the uptrend should continue and a broken-wing iron condor with a bearish skew. Remember these are not buy/sell/hold recommendations, merely examples of various strategies for educational purposes. The prices are taken as of Friday afternoon, when NFLX shares were trading at $132.29, down 76 cents on the day.
(more…)
Tags: Iron Condor, Long Call, Netflix, NFLX, Stock Replacement
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Earlier this week, AutoZone (NYSE:AZO) shares were downgraded to hold from buy at Citigroup. The firm noted this was a valuation call, based on a 12-month price target of $224. That allows for roughly 9% of additional upside for the next year.
The stock has already been in a strong uptrend since February, gaining more than 30%. This downgrade contributed to sending the shares more than 2% lower, however, and the shares subsequently violated their 10-day and 20-day moving averages.
The retailer is expected to report earnings on or around September 21, which is shortly after September-series options will expire. Analysts are currently projecting per-share results of $5.37, a healthy increase from last year’s fourth-quarter results of $4.43.
(more…)
Tags: AUTOZONE, AZO, BEARS, BULLS, Citigroup, DOWNGRADE, Iron Condor, Long Call, NEUTRAL STRATEGY, Trading Ideas
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Boeing (NYSE:BA) is seeing some bullish attention this week surrounding its second-quarter earnings report. Wednesday ahead of the open, the aerospace name said second-quarter earnings came in at $1.06 per share, a nickel better than the consensus view. Revenue fell short of the mark, however. Nevertheless, Jim Cramer told his Mad Money audience that he likes the stock in the long term, particularly if it tests the $65-$66 region.
Thursday morning, Societe Generale offered its insight, upgrading Boeing from “sell” to “hold”. Interestingly enough, the firm maintains a 12-month price target of $65, which actually allows for a bit of downside in the next year. Whether you are a Boeing bull yourself or think the stock could stay range-bound, we’ve outlined a couple of option strategies below as examples of how varying outlooks can be represented by options. Remember that these are not buy/sell/hold recommendations. The prices are taken Thursday afternoon, when the stock was trading at $67.45, up 13 cents on the day.
Tags: BA, Boeing, Bull Call Spread, Earnings, Iron Condor, Option Strategies
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