eem options trading strangle 051019 1024x388

EEM Strangle Opened 051019 Closed 061019 $28 profit

Markets have had some volatility creep in recent weeks, so I decided to scale in to short volatility with selling options to generate theta in my Tastyworks margin account.  I have not been selling strangles in the past few months due to the market climbing and having low volatility.

I used EEM which is the Emerging Markets etf to place a trade using the short strangle strategy, which is a short call and short put to generate theta between the two strikes.   This is neutral strategy.

As long as the price remains between $36 and $47 I will be profitable.

The reason I chose the EEM etf is because implied volatility rank was relatively high, and a short strangle is short volatility.

I sold the Sept 19 -47 call strike and -37 put strike for a credit of .80 cents which at the time of placement was 131 days until expiration.

I plan on making between .35 cents and .40cents (approximately 50% of max profit) before exiting this trade.  I have a GTC (good til cancelled) order placed for .40 cents which would yield me $40 in profit.

I will manage this trade by rolling in the strikes if tested.

I will exit at a loss of 2x credit received.   If the trade becomes $1.60 then I will exit.    Because the risk on this trade is undefined, I must have a mental stop loss in place.

 

 

Update – Trade Closed for $28 profit.

This EEM strangle was closed on 061019 for a $28 profit. I had a GTC order in and it filled.

 







Here is a screenshot of an EEM monthly chart with the range that the price must stay in for me to be profitable.

chart monthly eem options trading strangle 051019Here is a screenshot of an EEM daily chart with the range that the price must stay in for me to be profitable.chart monthly eem options trading strangle 051019 1

 

Here is a risk profile of the trade on 05-22-19eem options trading strangle 051019

 

Here is a risk profile of the trade on 05-28-19
052819 screenshot eem options trading strangle 051019

Here is a risk profile of the trade on 06-03-19

0560319 screenshot eem options trading strangle 051019

 

Here is a risk profile on the trade on 06-08-19
060719 screenshot eem options trading strangle 051019

Here is a risk profile on the trade on 06-10-19 after my GTC order filled and closed the trade.
061119 screenshot eem options trading strangle 051019



 
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