💡 $357 profit with 72% PoP STRANGLE - #1 trade in my challange

2024年1月3日

Trade Overview:
Initiated my first options trade for the annual challenge on January 2nd with an IWM strangle. Observing high IVR in the index, I capitalized on the recent VIX spike to enter the 45DTE 212/188 strangle for 3.57cr.

Trade Management:

• []Rolling Strategy: Will roll legs as needed before expiration if price diverges.
  []Loss Management: With a 12K account, I'm capping floating loss at $200.
  
• Closing Strategy: Targeting to close around 21DTE.
  

Trade Details:

• []Symbol: IWM
  []Option Type: Strangle 45DTE
  []Entry Date: January 2, 2024
  []Entry Price: 3.57cr
  []Required BP: $1681
  []Max Profit: $357 (20% of capital)
  
• PoP: 72%
  

Positions:

• []IWM Feb 16, 2024 212.00 CALL - Sell | Price: 1.76 | Qty: 1 | R. PnL: 0 | Commission: 1.251 | Fees: 0
  []IWM Feb 16, 2024 188.00 PUT - Sell | Price: 1.81 | Qty: 1 | R. PnL: 0 | Commission: 1.2511 | Fees: 0
  

Key Metrics:

• []Tasty IVR: 42 (High)
  []Breakevens: 184/215
  

2024年1月7日

註釋

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[u]Let me report on the equity curve analysis five days after establishing a strangle on IWM[/u]. Even though IWM has been consistently falling since I opened the strangle, the high theta decay has started to significantly benefit the position. This is exactly what favors this strategy: as days go by, the floating breakeven points progressively move further out. This means that even a minor retracement and a decrease in implied volatility rank (IVR) might result in enough floating profit to close around the target price, potentially realizing about a 50% profit.

Many believe that the neutral strangle strategy is only profitable if the underlying asset doesn’t move, but this is a misconception. In reality, it’s perfectly fine if the price fluctuates; it just shouldn’t move unidirectionally or far beyond the strikes. Time decay does the rest. How do I manage it? When the price tests one leg, I roll the untested side.

Another misconception is that because a strangle has “unlimited” risk, it’s unmanageable. In fact, strangles are among the most manageable strategies, especially when used on indexes like RUT or SPX, where there’s a small chance of sudden significant moves beyond the range. From my experience, strangles on indexes and ETFs are very manageable. With proper attention, the maximum loss can just be the credit received for the trade, although that’s in extreme scenarios.

Regarding the Implied Volatility Rank (IVR), some have questioned opening such a position in a low VIX environment. First, while the VIX value is not negligible, the implied volatility and IVR of the underlying (in this case, IWM) are much more critical. Currently, the IVR is considered extremely high for indexes, making it an opportune time for a strangle.

2024年1月11日

註釋

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Rolling after 9 days (36DTE)

9days later I've rolled down the call side
(212->205) for additional .72cr.
Now 4.29cr on on the table.
PoP 69% | IVR: 30
BE now Between $183.71 - $209.29
Current wings: 188/205

2024年1月25日

交易結束：目標達成

[ CLOSED Trade #1 ] IWM strangle

Realized profit:✅ $172m this is great! 💸💰

22DTE, I don't have free time for tomorrow, and the price is at the middle of the range.
Optimal for close!

So I've bought back for 2.57 debit,