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Tony Zhang's 'Iron Condor' Trade On Lowe's

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On CNBC's "Options Action," Tony Zhang said the home improvement space remains one of the strongest categories of consumer spending and he sees the poor performance of Lowe's Companies Inc (NYSE: LOW), since it reported earnings, as an opportunity to play for a bounce.

Lowe's Companies' fundamentals and the technical setup look fairly encouraging to Zhang, but he is just mildly bullish because of the current market conditions. He wants to use the "iron condor" options strategy for Lowe's. Specifically, he wants to sell the April $150/$140 put spread and the April $160/$170 call spread to collect the premium of $5.10. The premium is his maximal profit and he can maximally lose $4.90 if the stock trades above $165.10 or below $144.90 at the April expiration.

For traders who want to set up this trade on Monday, Zhang suggested that they should adjust the strikes $5 higher because Lowe's bounced higher since he looked at the trade.

 

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