Have an order I hope to fill in the morning - an iron condor on the DIA
10 contracts: Buy March 120 puts; Sell March 121 puts; Sell March 131 Calls; Buy March 132 Calls
Credit for the trade = .40 (I may have to budge but will try to get this price)
Max Profit = $400/ Max Loss = $600
Downside breakeven = 120.59/ Upside Breakeven = 131.39
Probability of DIA staying in the range based on current option pricing = 58.61%
Option pricing suggests a 23.62% probability of the DIA closing above my upside breakeven of 131.39. Additionally, from a technical perspective, the 8ema just crossed the 21 ema on a daily chart, which is bullish and poses some risk to the upside. However, the 55, 100, and 200 ema on a daily chart should act as powerful resistance to the upside. In fact, the 55 ema knocked the DIA down today from its high of 127.57.
On a daily chart the 55 ema comes in at 127.13; 100 ema is at 128.34; and 200 ema is at 128.67. When I see confluence of major resistance like this I feel more confident the DIA will have trouble in the short term breaking above 130. Additionally, the 61.8% fibonacci retracement of the move from 137.15 to 115.56 comes in at 128.91. Simply put, 129 is a huge test for the DIA.
Option pricing suggests a 17.7% chance of the DIA closing below the downside breakeven of 120.59. The 25% retracement of the move from 137.15 to 115.56 provides support at 120.97. The 8/21 ema cross and a positive MACD reading are bullish which should keep the DIA above the short puts.
With 23 days to expiration, my plan is to allow time decay (positive theta) to work in my favor. As always, I will buy back the iron condor by Friday (3/14) the week before expiration Friday.