2/25/22 Update – CLOSED
CLOSED – On Friday, the SMH Iron Condor trade hit 21 days until expiration (DTE) so I closed it, slightly below my profit target, as I opted for following the mechanics over attempting to squeeze out a few extra pennies from the trade. To exit the iron condor I executed the following 4 “Buy to Close” trades:
- Bought 1 SMH 03/18/22 Call 305.00 @ 0.58
- Bought 1 SMH 03/18/22 Put 245.00 @ 3.17
- Sold 1 SMH 03/18/22 Call 310.00 @ 0.35
- Sold 1 SMH 03/18/22 Put 240.00 @ 2.49
In Summary: We collected $163 in premium at the beginning of February, and closed on Friday for a $91 debit, leaving us with a 72$ profit. We put $337 at risk for this trade, leaving us with a 21% ROI over 3 weeks.
|Selling An Iron Condor in SMH
Today volatility was up and I wanted to take a shot at selling it using the Semiconductors ETF (SMH) as my vehicle to do so.
What’s the Trade?
With SMH trading for $271 and an IVR of around 68%, consider selling March monthly 240/245 305/310 Iron Condor for around $163 in premium on entry. After entry I set a GTC (Good Till Cancelled) order to close at 50% of the premium collected ($82). We are aiming to close after 50% of the premium has decayed, or we get to 21 Days until Expiration (2/25).
* Sell 1 SMH 03/18/22 Call 305.00 @ 2.97
* Sell 1 SMH 03/18/22 Put 245.00 @ 5.84
* Buy 1 SMH 03/18/22 Call 310.00 @ 2.22
* Buy 1 SMH 03/18/22 Put 240.00 @ 4.96
Total Premium Collected: 163$
Total Risk: 337$ (Note this is calculated by subtracting the premium collected from the distance between the spreads on each side, or $500-$163).
Rationale: This is a defined risk trade while volatility is high. The goal is to collect about 1/3 of the width of the strikes on each side — and we are doing just that with $163 collected on entry. This trade has a 75% chance of collecting $82, and a 25% chance of losing up to $337. We will collect $2.25 in daily theta decay as well.
Timeframe: ~ 2-3 weeks