A trade in iShares Dow Jones US Real Estate (IYR)

Here is a list of some of the stocks that make up the $IYR ETF:

IYRA complete list can be found here.

As for my trade, I had been stalking $IYR this week looking for a level where I felt buyers would step in. Here is the trade that I initiated on June 5:

IYR_tradeHere is a breakdown of the trade:

  • I am short the June 67/66 Put Spread (1/2 position to start)
  • I am short the June 69 Call (1/2 position)
  • I am long the July 69 Call (1/2 position)
  • This trade was done for a small credit

I later shorted the ETF at 67.5 as a hedge on the short Put spread. I am looking to build a cushion with this hedge to cover any loss that may occur on the short Put Spread piece. Here is a current Daily chart on $IYR:

IYR_BHere are some scenarios that can play out in this trade:

1) The stock settles in at this $67 level and allows for all the June Option pieces to expire in a few weeks. The small credit would still exit (plus any $ that I can get from the hedge) and would be long July 69 Calls.

2) The stock breaks down further to $65. The June Put Spread loss would be capped at $1 and the hedge would show a profit of $2 so there is some gains in this scenario. The July 69 Calls would exit for any upside move into July.

3) The stock rebounds to $70 by June expiration. The hedge piece would be stopped. It is likely I would adjust the 69 Call Calendar pieces when price approached the $69 level.

One thought on “A trade in iShares Dow Jones US Real Estate (IYR)

  1. Pingback: Options Expiration plan for June 2013 | 1nvestor

Leave a Reply

Your email address will not be published.