EWZ Analysis

iShares MSCI Brazil Index (EWZ)

The trading idea comes of Ryan at Dough, who earned a 1.60 credit. The position diverges from my guidelines in that expiration is less than 30 days away. The implied volatility is also lower than my 50th percentile requirement. The width of iron condor is also narrower than what I usually allow. Let's see how it works.

I shall use the DEC series of options, which trades for the last time 18 days hence, on Dec. 17.

Implied volatility stands at 38%, which is in the 31st percentile of its annual range. The price used for analysis was $34.07.

Iron condor, short the $34 calls and long the $36.50 calls,
short the $34 puts and long the $31.50 puts,
sold for a credit and expiring Dec. 17.
Probability of expiring out-of-the-money

DEC	Strike	OTM	Δ
Upper	34	77.8%	52
Lower	31.5	82.6%	25

The premium is $1.61, which is 64% of the width of the position’s wings.

The risk/reward ratio is 0.6:1.

Decision for My Account

I have placed an order on EWZ as described above. The stock price at entry was $34.06,

-- Tim Bovee, Portland, Oregon, Nov. 28, 2016

Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy by Cathy O'Neil

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.


Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading. 

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Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.