Hey Folks!
Ok, here goes the second week of blogging the trade right after I do it. I tried to put this trade in yesterday, but was stopped out. I always enter these spreads trades as day trades, meaning that if they don’t get filled by the end of the day they are cancelled out. So here is the trade that I was able to get into first thing this morning. The prices for these options are changing dramatically but the general idea is still looking good.
TRADE FOR WEEK ENDING March 2, 2012:
This trade is another condor. I know I said I rarely do these then do two in a row, but the technical are really lining up for this type of trade. Here are the details:
RUT
RUT 795 Put ($0.57)
RUT 805 Put $1.12
RUT 835 Call $0.74
RUT 845 Call ($0.29) This trade should give a Net Credit of $1.00 or 10.00% ROI
ANALYSIS
1. The RUT chart is leveling out. Right now it is in a channel between the 830 and 810 price points as seen by the purple. the trade parameters are the white lines.
2. The 835 price level for the call side is just above the 6 month high price for the index. Also this is just above our channel.
3. The 805 price level is just outside our channel. This is above the 795 price level that is the 2nd tier support level (actual number is 793, but 795 strike price is the closest to the actual number). To make this trade much less risky but also much less profitable – ROI = 4.20% from 10.00% - the 795 or 800 price levels could have been used.
4. My probability calculator put the odds at 85.01% of RUT ending up between the upper put and lower call.
5. The trend for the week so far has been slightly downward for the RUT index by about 4 points. This trade is right at the 1 Std. Dev. above AND below the strike price at time of trade.
6. I did look at the other index option – SPX and NDX. SPX had comparable ROI spreads, but the Friday AM settlement for the RUT pushed the RUT in front. The NDX just didn’t have the ROI needed. NDX is a hard index to get good ROI on unless it is traditional options expiration week.
7. Summation:
a. The boundary strikes for the condor were just outside the channel shown in the charts
b. The probability calculator gave a favorable percent of this trade ending up in my favor, although just barely at 85.01%
c. I was able to get good ROIs at 1.0 Std Dev away from the strike price
DISCLAIMER: Hashley Capital Management, LLC; as well as myself are not giving any trading advice. All data is historical in nature and is intended for use as an educational tool. Trading in options is risky and can result in loss of capital. There is no attempt to sell any brokerage services or act as a broker or dealer by Hashley Capital Management, LLC. Any forward looking comments on this blog are not attempts to solicit business for Hashley Capital Management, LLC. If you choose to follow the same path and invest in the strategies and trades used by Hashley Capital Management, LLC after doing your own due diligence than that is your decision and yours alone.
Reach me @:
Email: hashleycm@yahoo.com
Twitter: @hashleycm
Or leave a comment on the blog
TTFN
Ash
No comments:
Post a Comment