LaurenTrading

Citigroup Short July Iron Condor w/ sideways channel

NYSE:C   CITIGROUP INC
Citibank has been trading within a horizontal range and sideways channel between 65.50 and 69 for the past fourteen trading days. Because of this, we are shorting the iron condor by writing the 69 calls and 65.5 puts for the initial strangle, and going half a dollar out on each side to acquire the protection (longing the 69.5 calls and 65 puts), thus turning the strangle into an iron condor. Being slightly below the money, it is somewhat bearish but created such that it aligns with the historical channel. By using the July 5th options, which are eight trading days away, we expect Citi to stay within the channel. This trade is done for a max profit of 30 and a max loss of 20 because the credit is .30/contract. This gives us break-evens of 65.2 and 69.3, and a better risk reward ratio (30/20) is received when the trade is done with calls instead of puts (29/21). This maximizes profit potential.
Your current perspective, Lauren? Three weeks of consolidation near a new resistance. A breakout would not be surprising. Thanks.
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C broke out and crossed 70. What did you do today (6/28)?
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@tobyz7, We are sitting on it right now as we think there will be a disappointing lack of progress from the G20 which should bearishly affect the entire market by Monday, bringing Citi down with the whole market. However, if there are unexpected developments over the weekend and there is not a widespread movement lower, and Citi is still trading above the channel, we will turn the iron condor into an iron fly by adjusting the bottom put spread upwards. This would allow us to increase the premium we receive, and thus limit are maximum loss if Citi proceeds to move adversely, outside of our range.
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@tobyz7, Thank you for asking! Glad to share our current thought process -- always wiling and eager to answer any inquiring comments on any posted analyses.
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