Learn How To Trade Options – I Went Bearish On IYR

tastyworks

 

 

ETF NAME – iShares US Real Estate ETF

TICKER – IYR

MY OPINION (JUST MY THOUGHTS, NOT ADVICE) – I think IYR is due for a small pullback.

STRATEGY USED – Sold a call spread to finance a put spread.

My Thoughts On

Last week, you may remember that I sold a put spread to buy a call spread. I closed that position, after more than doubling my money. Yesterday, I sold a call spread to buy a put spread.

iyr chart analysis

I use FINVIZ.com to get a general look at charts, and also use their screening tool to find trade ideas. If you are looking for ideas on how to trade in the stock market, I recommend you start there.

Looks like IYR is showing a shooting star, so I sold my long position, and opened a bearish position. Here is the screen shot below. The bottom is me selling my long, and then on top you can see the new position that I opened on IYR.

learn to trade options

The above is a screenshot from my Tastyworks account, using their mobile app. You can see that I bought back my 79/83 put spread, and simultaneously sold by 81/83 call spread, collecting a total of .91 per share. Since each contract equals 100 shares, you multiply that by 100, and I sold the whole thing for $91

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The top transaction shows that I opened a new trade in IYR, for the same September 2018 expiration. It is my opinion that IYR will be pulling back so I sold a call spread to finance a purchase of a put spread. I sold the 83.5 / 85.5 call spread, and at the same time bought at 83 / 84.5 put spread. For this trade, I had a .22 debit per share which is really $22 since you multiply it by 100.

The figure below shows how that would look on the Tastyworks desktop app, which is what I prefer to use. You can trade on your mobile device as well, but I prefer a desktop if available.

 

trade options in etf

You can see that this trade has an 80% POP – Probability of profit. If my assumption is correct, and IYR is below $83 at expiration, my max profit will be $128. This is calculated by the difference of the spread that I bough, in this instance, my put strikes, less the cost of what I paid to enter into this spread. ( 84.50 – 83 – .22 = 1.28) x 100 = $128

If my assumption is incorrect, my max loss would be $222. This is calculated by the difference between the strikes of the spread that I sold, or the call strikes, plus the $22 i already paid to put this trade on. (85.5 – 83.5 -.22) x100 = $222.

Conclusion

I think that IYR is due for a pullback, and have entered a position that will allow me to profit from that assumption. These statements are only my opinion, and are not to be taken as financial advice. This is a blog that is meant to be a fun way for beginners and advanced traders alike, a place to learn and educate each other. The stock market is full of risk, and you may lose money.

stock chart

James

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

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