Currently, (GLD) Gold ETF is trading at the high of its yearly range. Price movement, as is always the case, remains relatively unknown. Therefore, we elected to identify a strategy that could become profitable even if our directional bias is wrong. The Condor strategy, when built as follows, will achieve maximum results with a price move lower. However, should price continue to increase a profit may be realized at expiration given the net credit received at entry.
Gold ETF Analysis
-1 Mar 20 148 Put – 1,930 Open Interest | +1 Mar 20 147 Put – 11,457 Open Interest |+1 Mar 20 144 Put – 6,876 Open Interest | -1 Mar 20 142 Put – 6,097 Open Interest
.02 cents bid/ask spread on each listed contract
Liquidity is superb. Therefore, monitor throughout to avoid any potential liquidity declines that may appear as expiration draws closer.
Implied Volatility (IV)
IV – 11.57%
Implied Volatility Rank – 25.86%
IV is currently at the lower end of its yearly range. This could prove beneficial with the condor strategy’s positive vega. In addition, should volatility increase from its current level the position will profit as IV moves higher.
Days to Expiry (DTE) – 59 days
IV – low
Intrinsic Value – $1.48 total (all contracts)
Extrinsic Value – $5.36 Total (all contracts)
Current GLD Price – $146.79
Expected GLD Price – +/- $5.42
The condor strategy selected will suffer each day Gold ETF price fails to move lower. The calculated expected move is ~$5. However, several economic factors are contributing to the likelihood Gold ETF will experience a rise in price as investors seek safer investments outside stocks.
Market Trend – Bullish
Support/Resistance – Resistance
IV Rank – low
MACD – Bearish Crossover, Bearish Divergence
RSI – Overbought
Pivot Point – Bearish
Volume – Below 50 Period Daily Average
-1 Mar 20 148 Put | +1 Mar 20 147 Put | +1 Mar 20 144 Put | -1 Mar 20 142 Put
Net Credit – $.11
At expiration, total profit/loss occurs when;
Higher Price – $.11
Flat Price – ($.89)
Lower Price – $111
Probability of Profit – 72%
Probability of Loss – 28%
Position Size – 1 lot
We believe price, from a technical analysis perspective, will move lower in the near term. However, theta is against the position at the outset. Thus, validity of our technical assessment remains to be seen.
($100) buying power reduction
($.49) long put spread cost
$.60 short put spread credit
$.11 net credit
Maximum risk – ($.89)
Maximum Profit – $111
Stop Loss – ($13.50) or 15% of risked capital
Alternative Stop Loss – 30 DTE
Profit Target – $17.50 or 20% of risked capital
Stop is determined by a 15% loss or when 30 DTE has been reached (at any gain/loss %). Furthermore, Profit target remains firm to close if/when achieved.
Price appears to be forming a bullish flag pattern. Additionally, Price is above the 10/30/50/200 period moving averages. Also, RSI is trending higher the past 7 sessions.
The Condor strategy suffers maximum pain when volatility declines and price increases. Additionally, should price remain flat, extrinsic value will deteriorate exponentially as expiration approaches.
Capital at Risk
Maximum loss of capital will occur at the aforementioned stop loss level, 15% on risked capital.
Risk Profile of Strategy
14/25 or 56% OptionID Success Probability
May God Bless and Keep this OptionID profitable.
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