It was a somewhat deceiving day today in the markets: a bunch of stocks fell sharply while another bunch rose sharply. The SPY went up a bit but so did the VIX so I have a feeling that tomorrow we will see the prices dropping again. I must say I find the choppiness of the market quite amusing. For option trades, these types of markets represent great opportunities but one's account can also be wiped out quickly if not managed properly.
So what's my trade for today?
#ARKK (#ArkETF). This ETF is as volatile as it gets but I couldn't resist try my luck with it again. I chose a very wide strangle at $30/60, which means both sides are over 30% further than the current price of $44. It sounds like a 100% secure deal as how could an ETF move that much within 60 days? Unfortunately the truth is that it can. Easily. Especially this particular ETF so careful management of the position is required.
Trade Type: Short Strangle
Strike: $30 / 60
Expiry: 19 Aug
IV Rank: 67.2
Cap Req: $440
Annualised Prof at Expiry: 164%
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A nice winner!
Closed at $1.07 for an annualised profit of 129%.
This was a low risk deal so I could have held it for some time, but I have a feeling that the volatility is going to creep up this week so I am freeing up some credit.
I might jump back into this deal in a few days.
Rolled down the call side to $0.55 for $0.22 credit.
Total credit: $1.35