A trade review for Mexico iShares EWW

I have had a position in $EWW since 3/4/2013 but it has taken on many faces since the initial entry (Long at 70.85). I receive a lot of questions regarding the Position Update post that I do each week so I thought I would provide some additional detail on what my updates are – and how a trade looks like on a chart.

Here is a recent look at the $EWW from my Trading Journal:

EWW_blog_chart_2Now for a breakdown on each column:

  • Stock – this is the ticket of the position
  • Entry – sure you understand this
  • Size – I note any position that is not at Full size, done in decimal
  • Current – current price of the underlying (whether the trade is stock or options, no matter)
  • G/L – this is the Gain or Loss currently (does not include any gain/loss on any Options pieces though)
  • Strategy – sure you understand this
  • Acct – account type
  • Notes – I note any activity with the trade, every adjustment, date, etc.
  • Date – entry date
  • Exit Date – sure you understand this
  • Option/Collar – I note any current Option pieces
  • Net on Opt – the net on all Option pieces within this trade

So with the $EWW trade specifically, this is where things stand right now:

  • I am long the ETF on a trigger at $65
  • I am short the August 67/64 Strangle (67 Calls, 64 Puts)
  • I have a net on Options of $7.03 (a nice cushion)

So let’s see how this looks on a chart. First, a clean Daily chart to review:

EWW_blog_chartNow let me add the Strangle window (defined by the Blue Box) & the price range (Green lines) for the Short Strangle pieces:

EWW_blog_chartThe $7.03 cushion provides quite a range to work with. A few scenarios that can play out:

1) Stock runs up to the 200 SMA ($69)and stalls at expiration. The long stock is called away, the cushion & $2 gain on stock is the profit. The short Puts go poof.

2) Stock churns sideways, stay in the Blue Box area. The strangle expires, put it on again for September which would add to the cushion.

3) Stock falls to the 50 SMA (65.55). The strangle expires, put it on again for September which would add to the cushion.

4) Stock falls to $60 level. It would be prudent to let the stock hit a Stop before this (likely choose the $64 level). Focus then would be on managing the Short $64 Puts.

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