Case Study: Iron Condor on Kimberly-Clark Corporation (KMB)
On May 22, 2010, I found Kimberly-Clark Corporation (KMB) moving in a very interesting pattern.
KMB has been gyrating between its support of $59 and resistance of $ 63.5.
Earning for this stock is 59 days away. So it is potential candidate for a sideway strategy.
Latest dividends pay-out of $.66 is coming in Jun 02. This stays right in the way of the nearest options month. Thus, we will have to look at a butterfly or condor instead of calendar.
Another support for a all-in-one options month strategy for KMB is implied volatility to date is very high. All months’ IV is above 60% for the last 1 year.
This suggests a stay-away from calendar and a potential benefit for the bird-family.
Ok. So let’s quickly construct a iron-condor for KMB with 28days to expiration
- Buy 1 KMB Jun10 67.5 Call for $0.03
- Sell 1 KMB Jun10 62.5 Call for $0.57
- Sell 1 KMB Jun10 60 Put for $1.3
- Buy 1 KMB Jun10 55 Put for $0.35
- Max profit = $149
- Max Risk = $351
- Margin = $351
- Upside Breakeven= $63.99
- Downside Breakeven= $58.51
These two even-points will be used as exits with market order.
Last, probability for this trade is quite high above 75%. My expectation is run this trade into expiration and hopeful can do it again in the following month. Experiment with wider short legs and see if you like the ROI.
This trade will be revisited for the final result.
This serves as an information-only and by no mean an investment advice.
Category: Case Studies
