Sunday, January 22, 2006
Call options trades.....
OK, we are going to go over the call options that we talked about earlier in the week. I'm going to simply compare the prices of where they where to where they are. Simple right? Well, actually yes. It should be. Here we go!
On the 17th we sold a call credit and debit spread, right?... let's keep our order correct and we will do credit spread first. Here are the prices we sold it for on the 17th.
Bot, Feb 1375 for .25. Sold Mar 1375 for 1.10. Our total spread was a credit of .85 and a hopeful net profit of .60 or (.60 * 250 or $150).
after about a 2 percent correction in 3 days on the S&P 500 what do we have here? I will look it up!
Feb 1375 call for .20 and the Mar 1375 for .55. Well, that isn't half bad! Our short went down by .55 (1.10-.55=.55) and our long dropped to .20 (just wait till we talk about spreads to see how relevant this number really is!).
Total spread was .85 (1.10-.25) and it is now .35 (.55-.20). Total gain is .50 or $125 (.50 *$250). My advise is to take the profits and run!
On to the Debit spread.
We Sold Feb 1310 for 7.40 and Bot Mar 1310 for 13.50 for a total debit spread of 6.10.
The current prices are:
Feb 1310 is 2.55, and the Mar 1310 is 6.70. Our total spread is now worth 4.15. Hmmm... We paid money for this one and it is worth less than what we bought it for? Well, yes it is but just wait until we calc what a threoretical put position would have been worth in the next post before you call it quits!
The Credit spread made you a little money and the Debit spread lost a wee bit more as the Scottish would say. This is only really 1/2 the story. The other half are the corresponding put spreads that you would have most likely sold.. I know I would have...
Trader X
On the 17th we sold a call credit and debit spread, right?... let's keep our order correct and we will do credit spread first. Here are the prices we sold it for on the 17th.
Bot, Feb 1375 for .25. Sold Mar 1375 for 1.10. Our total spread was a credit of .85 and a hopeful net profit of .60 or (.60 * 250 or $150).
after about a 2 percent correction in 3 days on the S&P 500 what do we have here? I will look it up!
Feb 1375 call for .20 and the Mar 1375 for .55. Well, that isn't half bad! Our short went down by .55 (1.10-.55=.55) and our long dropped to .20 (just wait till we talk about spreads to see how relevant this number really is!).
Total spread was .85 (1.10-.25) and it is now .35 (.55-.20). Total gain is .50 or $125 (.50 *$250). My advise is to take the profits and run!
On to the Debit spread.
We Sold Feb 1310 for 7.40 and Bot Mar 1310 for 13.50 for a total debit spread of 6.10.
The current prices are:
Feb 1310 is 2.55, and the Mar 1310 is 6.70. Our total spread is now worth 4.15. Hmmm... We paid money for this one and it is worth less than what we bought it for? Well, yes it is but just wait until we calc what a threoretical put position would have been worth in the next post before you call it quits!
The Credit spread made you a little money and the Debit spread lost a wee bit more as the Scottish would say. This is only really 1/2 the story. The other half are the corresponding put spreads that you would have most likely sold.. I know I would have...
Trader X
