Sunday, January 22, 2006
Puts... the other half of these trades.
I may have to break this up into 2 different post because it's getting late but I think we can at least create the positions that we would have taken back on the 17th. Now let's get on with it! We will start with a credit spread as we did before.
Buy Feb 1125 for .40. Sell Mar 1125 for 1.20. The total credit is for .80. In a perfect world the Feb's would go to 0 and the Mar's would drop to .40 (1.20 - .40 = .80) total possible gain of .40 or $100. If this doesn't makes sense to you then review the past entries to check my calcs. If they still don't make sense to you then I've had too much wine with my dinner!
OK, on with the debit spread:
Let's sell a Feb 1270 for 9.50 and buy a Mar 1270 for 16.20. You paid 6.70 for this trade but you hope to make 2.80 on this trade (9.50 goes to 0 and the 16.20 goes to 9.50 in a perfect world remember? Total difference is gain of 9.50 - loss of 6.70 (16.20-9.50)= 2.80.). As before the debit seems to make more than the credit off the bat.
Let's see what the numbers are after the 2% drop, give or take, on the S&P, last Friday.
That will be the next post.
Trader X
PS, it's getting late and I may need to do some re-editing to these. If they don't makes sense number wise to you it may be because I'm getting tired.
Buy Feb 1125 for .40. Sell Mar 1125 for 1.20. The total credit is for .80. In a perfect world the Feb's would go to 0 and the Mar's would drop to .40 (1.20 - .40 = .80) total possible gain of .40 or $100. If this doesn't makes sense to you then review the past entries to check my calcs. If they still don't make sense to you then I've had too much wine with my dinner!
OK, on with the debit spread:
Let's sell a Feb 1270 for 9.50 and buy a Mar 1270 for 16.20. You paid 6.70 for this trade but you hope to make 2.80 on this trade (9.50 goes to 0 and the 16.20 goes to 9.50 in a perfect world remember? Total difference is gain of 9.50 - loss of 6.70 (16.20-9.50)= 2.80.). As before the debit seems to make more than the credit off the bat.
Let's see what the numbers are after the 2% drop, give or take, on the S&P, last Friday.
That will be the next post.
Trader X
PS, it's getting late and I may need to do some re-editing to these. If they don't makes sense number wise to you it may be because I'm getting tired.
