Options Strategist
Summary: This article presents an educational example of using an Iron Condor strategy to capitalize on potential "volatility crush" during the earnings season, using JP Morgan's forthcoming earnings release as a case study.
Reason | High Implied Volatility (IV) due to numbers out on 14th July before market close |
Expectation | Limited movement in JP Morgan shares after releasing the figures and imploding IV |
BEPs on expiry | Profit between $139.75 and $153.75 |
Max Risk | If you get a premium of $1.45 the max risk/loss would be $5 - $1.45 = $3.55 per share. 1 contract = 100 shares. Max Risk/Loss = $3.55 * 100 = $355. |
Which clients | Only for clients to adhere to the view that the numbers will not cause a big move in the share price of JP Morgan |
Trade set up | Sell the Iron Condor in the last 1 – 4 hours of trading on Thursday 13rd for around $ 1,45 - $1,50 (stagger in case of bigger positions) |
Closing | A GTC (Good Till Cancelled) order to close the position at $0,30 (stagger in case of bigger positions) |
Emergency | If there is a big move in the underlying outside the bandwidth of the long strikes, monitor closely and close position latest on the 21th of July 2- 4 hours before expiry |
Probability of Profit | 62.85% |
Expected Move | for 14th July ’23, based on ATM straddle: +/- $4.37 |
IV Rank | 12.88% |
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