Easy Option Strategies – Bullish Iron Condor Using ETF SPY

In my opinion it the S&P 500 is due for a little upside action. Once again I use one of my favorite option strategies, the iron condor. When you sell an iron condor, you are selling a put spread and a call spread at the same time. There are more than a few ways to trade the S&P 500, but my favorite way is to trade the SPDR S&P 500 ETF which trades on the New York Stock Exchange under the symbol SPY.

easy option strategies

Often when someone sells an iron condor, they are direction neutral, and will place the short strikes an equal distance from the current underlying price. Since I have a bullish opinion on SPY, I decided to pull my put side up a little closer to the current stock price. This increases my premium, but also increases my risk to the downside.

I sold the 272 / 277 put spread and the 290 /295 call spread for January 18th, 2019 expiration, which is 49 days away. I collected $262 as my premium. This iron condor is skewed to the upside, I am looking for a little of a bounce here. Below you can see a screen shot from my tastyworks account. If you are interested in learning about how to trade stock options, I recommend you check them out. In my opinion, they are the best brokerage for stock options.

 

easy option strategies

==> CLICK HERE TO LEARN ABOUT TASTYWORKS BROKERAGE

Best case scenario would be for SPY to stay above 277, and below 290. If it does, I would get to keep all of my premium. But honestly, I plan to buy this iron condor back, for half of what I sold it for.

Here is another way to look at this trade. You can see that I sold the 277 puts and the 290 calls in red, and bought the 272 puts and the 295 calls which are in green.

 

easy option strategies

Another thing that you can see from the picture above is my Max Profit is 262, which is what I collected when I sold this iron condor position. My Max Loss is 238, which calculated by the width of my strikes, less any premium collected. I prefer to use limited risk stock options strategies over unlimited risk stock options strategies.

SPY ETF Technical Analysis

I always like to use stock chart technical analysis before I open a position, and below are some of my favorite tools. Some traders rely solely on technical, but I am not one of them. Before I enter into a trade I make sure to look for any news and information from FINVIZ, just to see if there are any upcoming earnings reports, or dividends. FINVIZ is the one stop shop for all the current news about any stock.

The Bollinger Bands show that SPY has bounced off the lower band and is crossing the 20-day moving average to the upside. This is considered a bullish sign, and I think the sellers are getting tired anyway.

 

easy option strategies

The RSI is at 53.88. This signifies neither overbought nor oversold condition. This is one of the reasons that I decided to put on an iron condor, instead of just selling puts.

easy option strategies

The MACD is a confirmed buy signal. Usually the MACD is the more stubborn of the confirmations, and is sometimes a little too late to the game.

easy option strategies

The stochastic is a confirmed buy signal as well. Usually the stochastic jumps the gun, but with the MACD and the Stochastic both confirming a buy signal, technical traders should agree that it is time to get bullish.

easy option strategies

I put this trade on with 49 days until expiration, because time decay for stock options is the starts to accelerate at 45 days. I could have sold the closer to expiration December iron condor, but I usually only sell that close when I have a strong directional opinion, and I will only sell one side, not an iron condor. With 49 days, I have time to manage this call if it goes against me.

I welcome all feedback, good, bad, or somewhere in between. If you have any questions, feel free to comment below.

Also, I am not trying to say you should make this trade, and I am not trying to give you financial advice. I am just trying to educate and discuss stock options.

 

James

I live in Pittsburgh PA with my family. I am 50% WWE Wrestlemaniac, 50% Walt Disney World nut.

8 thoughts on “Easy Option Strategies – Bullish Iron Condor Using ETF SPY

  • November 30, 2018 at 9:44 pm
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    Nice trade, I trade SPY all the time.

    The great thing about easy option strategies is you can structure any position in anyway that fits your sentiment, risk tolerance, and account size

    You used price improvement to better  your postiion  than 50/50 shot 

    Sure there may be better ways to do it, but this is how you learn .. and no matter what, it beats the heck out of passive mutual fund and ETF investing.

    Good luck !!

    Reply
    • December 3, 2018 at 10:03 pm
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      Thanks, I learned from tastytrade.

      Reply
  • November 30, 2018 at 9:46 pm
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    Seems pretty good actually. they’re 5 pt spreads so, not too narrow, positive decay, and going up small over the next 50 days is the most likely scenario. This spread has probably done really well historically.

    How do you evaluate risk reward of adding the call spread or leaving it off altogether?

    Adding the call spread: PoP -16%, max profit +36%. Those are just estimates. Is that worth it? Do you compute RoC both ways to figure that out?

    Thanks for your help.

    Reply
  • November 30, 2018 at 9:51 pm
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    I’m a total newbie when it comes to trading sites, so I have a lot of questions. I looked at the Tastyworks link to get a better idea. As a beginner, I see someone can sign up for an account with no deposit required. Is that a practice account to see the daily results or to get comfortable with the process first? What the minimum amount needed when someone is more comfortable using the program?

    Reply
    • November 30, 2018 at 10:35 pm
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      There is no minimum to open an account. You can fund it whenever you are ready, with as much or little as you feel comfortable with.

      There are no “Paper” or practice accounts at tastyworks at this time.

      Reply
  • November 30, 2018 at 10:04 pm
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    What do you look for when you decide to sell an iron condor?  Does this strategy work better with certain underlying equities compared to other ones?  I wonder if this would be a good strategy to use right before an earnings announcement, to take advantage of volatility crush.

    Why would someone do this instead of selling a straddle?

    Reply
  • November 30, 2018 at 11:06 pm
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    Hello, what kind of accounts can you open with tastyworks? 

    Can you explaint the differences between a margin vs a cash account? I am new to self directed investing, and could really use a little help.  I’ve read a few books, and have visited some online forums, and am ready to take control of my finances.

    Thank you.

    Reply
    • December 3, 2018 at 1:33 pm
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      Margin is the most flexible kind of account. It allows you to borrow money to trade with and enables you to use all of the trading strategies available at tastyworks.  To open a margin account you need to deposit at least $2,000.

      A cash account does not have margin benefits. That means you must be able to cover your trade’s full purchase price with the money already in your account. 

      Right now if you==> CLICK HERE TO OPEN A TASTYWORKS ACCOUNT,  you can open it with zero deposit and get access to all of the free stock option education that tasyworks has to offer.

      Reply

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