Actionable Alerts for Week of 21 June
Two ER plays + 1 directional play
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Both the recording and a written summary of the ER opportunities for this coming week are noted below.
Iron Condor Candidates (21 – 24 June 2022)
ACN Entry: Wednesday, 22 June (Past performance 4 out of 4 wins)
Exit: EOD on Thursday, 23 June
FDX Entry: Thursday, 23 June (Past performance 3 out of 4 wins)
Exit: EOD on Friday, 24 June
NKE Jul01 Delta 25 to 30 calls, Entry: Tuesday, 21 June, Exit: EOD
Monday, 27 June
The above are candidates for paper trades.
DO YOUR OWN DUE DILIGENCE
“Recipe” for Earnings Iron Condors
On noted day of play at 15:41, go into TomsOptionTools option chain for the candidate and determine the premium for the weekly straddle (call + put), rounded up to the nearest dollar. Subtract and add this amount to the current price of the candidate to obtain the short strikes. Choose one strike further (at least $1.00) in each direction for the long strikes. The candidate is valid if the total premium is a minimum of 33% ROI (=> $0.25 on $0.75 risk, $0.83 on $2.50 risk, etc…). Less is not worth it. Position size to Risk - $250 in a $10,000 account
The at the money straddle premium for MS on Weds EOD was $1.45 + $1.28 = $2.73. The stock price was $84.13. There for the ideal short strikes were $84.13 - $2.73 = $81 (rounded down) for puts and $84.13 + $2.73 = $87 (rounded up) for calls. Long strikes were $1.00 distant at $80 puts and $88 calls.
Total projected premium EOD for +1 x MS Apr14 $80 put / -1 x MS Apr14 $81 put / -1 x MS Apr14 $87 call / +1 x MS Apr14 $88 call was $0.29 credit on $0.71 risk for a total potential ROI of 40.84%. Position sizing for this example was 3 contracts x $71 = $210 risk. Exit is categorically EOD the following day.
Note: Candidate should be rejected if its options are illiquid (bid/ask for the short legs have > 15% slippage and/or the daily volume is < 20 contracts).