Good Iron Condor Opportunity on Regional Bank
05/18/2010 12:01 am EST
Zions Bancorp (ZION) is a regional bank that has been very popular with investors this year, soaring more than 130% since early January from $13 to $30. Now settling down to just a double on the year at around $26, this financial name could be poised for some range-bound trading. This July iron condor intends to capture a 40% return on risk if ZION shares stay between $20 and $32 for the next 60 days until expiration.
Iron Condor Trade Details
ZION is currently trading around $26.25, down roughly 3.9% so far at the time of this writing. (Be sure to account for current prices in the iron condor trade below.)
Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.
Iron Condor Part I: Bull Put Spread
- Sell the July 20 put
- Buy the July 18 put
- Net credit of $0.26 per spread
Iron Condor Part II: Bear Call Spread
- Sell the July 32 call
- Buy the July 34 call
- Net credit of $0.31 per spread
Overall Credit for the Four-Legged Spread: Around $ 0.57 ($57 per lot)
Maximum Profit: $0.57 (the total premium collected) minus commissions
Maximum Risk: $1.43 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 40% for this strategy
Upper Breakeven Price: $32.57 (the strike of the sold call plus the total premium)
Lower Breakeven Price: $19.43 (the strike of the sold put minus the total premium)
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