For all the talk of an impending recession, IYR, the real estate ETF, is the highest it’s been since 2007. It’s up 16.7% for the year, barely taking any breaks from its bullish run. That’s pushed its IV down to pitifully low levels, and its IV rank to 25%. Yes, complacency is the order of the day in the real estate market. Contrarian traders, though, may have a different take. The things keeping big real estate companies up – strong retail in malls and demand for the property REITs might own – could disappear if the perception of the economy sours. If you think IYR might drop and are bearish on it, the long put vertical that’s short the 87 put and long the 89 put in the May expiration with 43 DTE is a bearish strategy with an 85% prob of making 50% of its max profit before expiry and that generates $.36 of positive daily theta.
Opened 19/04/04 for $.92 debit
Closed 19/04/16 for $1.31 credit