Today I once again used one of my favorite money making stock options strategies to get a position on US Steel, which trades on the New York Stock Exchange under the symbol X.
US Steel (X) stock is currently near its 52 week low of 21.96, trading at around $23 a share. Volatility in the overall market is up, so I am looking to sell some premium. I chose to sell an Iron Condor, which is essentially selling a put spread while at the same time selling a call spread.
I sold the 19 / 22 put spread and the 27 / 30 call spread for January 18th, 2019 expiration, which is 50 days away. I collected $100 as my premium. This iron condor is skewed to the upside, I am looking for a little bit 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.
Best case scenario would be for X to stay above 22, and below 27. 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 22 puts and the 27 calls in red, and bought the 19 puts and the 30 calls which are in green.
Another thing that you can see from the picture above is my Max Profit is 100, which is what I collected when I sold this iron condor position. My Max Loss is 200, 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.
US Steel X Stock 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 X is pushing down on the lower band. From what I understand, technical traders will look for it to close above the lower band, then go back up to the center line, which is the 20-day moving average in this case. You can see that since mid June 2018, X has taken a beating to the downside.
The figure below shows the Fibonacci Pivot points for X as of today. Looks like X has broken though support of 23.64 shown by S2, and the next support is going to be at 21.32. These pivot points are calculated at the first of every month, and since there are only 2 more trading days left until December, I wouldn’t put much into those levels, I’m more eager to see what happens next month right now.
The last of my technical tools are the RSI, the MACD, and the Stochastic. The RSI shows that X is oversold at 29.04. This makes me feel bullish. The MACD and the Stochastic disagree, with MACD saying more downside, and the Stochastic saying maybe not.
I put this trade on with 50 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 50 days, I have time to manage this call if it goes against me.
One final note, understand that I am not posting this to give you financial advice. I am not an adviser, and there is risk involved with option trading. You can lose money.
I would love to hear from anybody reading this. Good, bad, agree, disagree, just want to say “Hello.” or tell me this is garbage.
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