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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The Cherry Bomb
December 6, 2018
As much as we love trading, we also understand it’s important to recognize Pres. George H. W. Bush’s funeral, and that if the markets are going to close for anyone, it might as well be a President.  But it’s also interesting to note that as much as we tastytraders believe that options are the world, we’re still the tail on the stock and bond market dog.  If they close, options don’t trade.  Now, I can envision a market where that relationship is reversed, but we’re not there yet.  And I emphasize “yet”. But if you got some rest yesterday and are champing at the bit to trade again today, one of the symbols with a high IV rank is XLE, the energy sector ETF.  Its IV has been persistently high as oil has dropped, even though XLE has traded in a range for the past 6 weeks.  XLE’s 80% IV rank cries out for a short premium strategy.  If you think that XLE might continue to trade in a range, the short iron condor that’s long the 60 put, short the 62 put, short the 70 call and long the 72 call in the Jan expiration with 44 DTE is a neutral strategy that collects a credit 1/3 the width of the strikes, has a 66% prob of making 50% of its max profit before expiry, and that generates $.91 of daily positive theta.






 
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Tom Sosnoff
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