IWM Buy Write

Updated

IWM drop to start the week makes presents a buy write opportunity.

- Options expire in 4 days. 7/23 210C @ $4.96 credit
- IWM @ $212.57
- Net purchase = $207.61 per share

If IWM closes above $210 = $239 in 4 days
If IWM closes below $210, my effective purchase price is $207.61. I would continue to sell Calls to collect premium.

IWM price is at support. I believe $205 is a key support level. Closing below $205 would indicate potential for further decline. As long as that price holds, I feel comfortable continuing to sell Calls and collecting premium credit.

Note

Rolled Call
Bought to close 7/23 210C for $9.07
Sold to open 7/30 216C for $4.77

New Net Credit is $.66
Potential gain if IWM closes ITM ($216) is $409 gain

Note

Additional trade information from the trade adjustment (rolling contract) made Friday:

New net effective IWM purchase price is $211.91. If 7/30 216C are exercised [$216-$211.91 = $4.09 per share ($409 per option contract)]

IWM has been in a consolidation range since early 2021. Range fluctuates around 207 to 234. In hind sight, it might have been better to allow the original trade to close, realize gains, and then open another position today rather than rolling the contract on it's expiration. The net total potential gains are basically the same, however collecting the realize gains would have been the wisest course of action.

Note

Previous Trade closed. $409 net profit.

Note

New Trade opened. Buy/write. 8/6 $220 C @ $4.73 credit. Net IWM purchase price $218.80. $1.20 potential net gain.

Note

Trade closed as options expired ITM. Net gain for 1 week $120.

Note

New weekly trade (buy-write) opened.
IWM trading at 221.98...in the middle of the trading range with slight downward pressure at time of trade.
Bought 100 IWM @ $221.98. Sold to open 8/13 221C @ 2.75 credit. Effective purchase price = $219.23. Potential net gain if ITM on Friday = $177.

Note

COMMENT: Current weekly potential gains (this trade and previous) have been reduced about 20% from the first two trades. Current IV is around 22%. I didn't record the IV at the first trade, but I thought it was less than 25%. I do know VIX has dropped at least 20% since the first trade. Trade becomes less appealing as IV drops. With that being said, this is a conservative neutral market strategy with potential to generate a .807% return in 5 days (annualized 42% return) based on current trade. While I like this trade much more when IV is higher, this is an effective way to generate returns when the underlying is range trading.

Note

Option expired ITM (by $0.13), but was not exercised.

Sold 8/20 217C for $3. New effective share price = $216.23. Potential net gain if ITM on Friday = $77

Note

8/20 217C expired OTM.

Sold to open a 8/27 217.50C @ $2.90. New effective IWM purchase price = $213.33.

If options are ITM at end of week, profit = $417

JLJ002500

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