Seagate Stock Volatility Sets Up This Strategy To Generate A Return

Seagate Technology (STX) stock is showing very high implied volatility with an IV Rank of 80%. Iron condors can work well when volatility is high as the short strikes can be placed further away from the stock price than normal. If the price of Seagate stock settles down, it could make for a great iron condor setup. Let’s look at how we might set up an iron condor on Seagate stock.

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Creating An Iron Condor

An iron condor can be set up via a combination of a bull put spread and a bear call spread. That creates a defined-risk, nondirectional strategy that profits if the stock stays between the short strikes.

First, we take the bull put spread. Using the April 17 expiry, we could sell the 340-strike put option and buy the 330 put. That spread could be sold for around $2.35, based on recent trading.

Then the bear call spread could be placed by selling the 490 call and buying the 500 call. This spread could be sold for around $1.25. In total, the iron condor will generate around $360 in premium.

The profit zone ranges between 336.40 and 493.60. This can be calculated by taking the short strikes and adding or subtracting the premium received.

That’s quite a large range for the data storage maker’s stock over the next three and a half weeks. As both spreads are 10 wide, the maximum risk in the trade is 10 – 3.60 x 100 = $640.

Therefore, if we take the premium of $360 divided by the maximum risk of $640, this iron condor trade has the potential to return 56% in around three and a half weeks.

If price action remains stable, then this iron condor will work well. However, if Seagate stock makes a big move the trade will suffer losses.

One way to set a stop loss for an iron condor is based on the premium received. In this case, the trader received $340, so they could set a stop equal to the premium of $340.

Seagate Technology is not due to report earnings until early May, so this trade should have no earnings risk.

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Seagate Stock Ratings At IBD

Investor’s Business Daily gives Seagate Technology stock a Composite Rating of 95 out of a best-possible 99. Its Earnings Per Share Rating is 76.

Seagate, the second‑largest U.S. manufacturer of hard disk drives, has aRelative Strength Rating of 98. The company’s storage products are used in a range of environments, including data centers and client computing devices.

According to IBD Stock Checkup, Seagate stock ranks fifth in its group. The company also produces SSDs and hybrid drives. Its broader portfolio includes SAS and NVMe storage devices as well as scale‑out storage systems designed for cloud and high‑capacity settings.

Please remember that options are risky, and investors can lose 100% of their investment.

This article is for educational purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.

Gavin McMaster has a master’s in applied finance and investment. He specializes in income trading using options, and is conservative in his style. He also believes patience in waiting for the best setups is the key to successful trading. Follow him on X/Twitter at @OptiontradinIQ.

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