We continue to see a very volatile market right now with many big moves back and forth and as a result, the prices of the options are more expensive.
To take advantage of the expensive options, we will look to sell a call spread on IWM which is the Russell 200 ETF in this weeks Options Trade Of The Week
For this trade, we will be selling the April 26 Weekly 156/157 call spread.
- These options have 14 days left to expiration.
- We are selling the 156 call and buying the 157 call to make sure we are in a risk defined trade.
With the market so active right now, I feel better about knowing my maximum loss up front on each trade.
We are collecting $.38 or $38 per spread on this trade. The $38 is our maximum profit potential. The great part is we are only risking $62 per spread. This opens the door for all account sizes to take this trade. You can put this trade on 10 times and only have $620 at risk.
Our break-even point on this trade is at $156.38 and this is calculated by taking the 156 strike of the call we are selling and adding in the $.38 that we are collecting when placing this trade.
One of the most important and exciting aspects of this trade is: We don’t care if IWM moves higher, lower, or sideways because as long as price stays below $156.38, we can make money. We also make money if time decay adds up and if volatility decreases.
5 Ways To Make Money
We have 5 different ways of making money on the trade and having so many ways of making money on this trade is why we are looking to sell the call spread instead of buying the long put.
Let’s see if the market decides to slow down or even pullback going into next week. We will continue to track this trade over the next 2 weeks to see if we can book a profit.
Open Trade Update:
We sold the April 20 33.5/34.5/29/28 Iron Condor for $.52. While this one has been all over the place the last few weeks, it’s currently trading for $.42. This gives us $10 of profit per spread so far. We will continue holding this trade into next week to see if we can get to our profit goal of $25-$40 per spread.
We sold the April 20 69.5/70.5/66.5/65.5 Iron Condor for $.47. Unfortunately, this one is moving against us. It’s currently trading for $.74 which leaves us with a loss of $27 per spread. We still have time on this trade so we will hold into next week. We need a selloff on XLE heading into next week to see if we can battle back. We might not hit our full profit goal but on any selloff next week we should be able to reduce our loss.