SMH Iron Condor

Apparently earnings weren’t enough for us to follow. Now we have to watch for pre-earnings “guidance”. Why? NVDA dropped the equivalent of 3.5 standard devs over the past two days after it announced on Monday that weaker Chinese demand for its gaming chips and lower datacenter sales would hurt its numbers on Feb 14. That’s kind of like thinking it’s smart to prepare your significant other for a disappointing Valentine’s Day, and getting pushed off a 3.5 standard dev high cliff. Ouch. NVDA took down other semiconductor stocks, which in turn pulled down their ETF, SMH. SMH had been rallying nicely since the start of the year, and that’s pulled its IV down into the low 30s. Even so, SMH’s IV rank is 56% and that makes short option strategies interesting. Who knows which way SMH will go from here, but if you think it just might stay in a wide range, you might consider a neutral credit trade. The short iron condor that’s long the 84 put, short the 86 put, short the 102 call and long the 104 call in the March expiration with 44 DTE is a neutral strategy that collects a credit 1/3 the width of the strikes, has a 74% prob of making 50% of its max profit before expiry, and that generates $1.03 of positive daily theta.

This Trade Is

Total P/L

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