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Thursday, October 27, 2011

November SPY Credit Call spread adjustment

Demo trading:
I adjusted the SPY Bear Call spread initially opened here, by closing the position and opening a new Credit Call Spread using the 133/135 November Calls. The rally today was INSANE, and although markets are overbought, the massive short squeeze can keep the markets overbought for a while. I totally underestimated the conversations in Europe to solve Greeks' debt issues. Good lesson for life.

The trade was as follows:
Buy to Close 12 SPY Nov 130 Call @2.05 (Initially sold @0.65)
Sell to Close 12 SPY Nov 132 Call @1.16 (Initially bought @0.35)
Sell 12 SPY Nov 133 Call @0.83
Buy 12 SPY Nov 135 Call @0.39

As a result the new position on the SPY is as follows:
(Click on Image to enlarge)

New credit of 0.44 obtained per vertical, meaning a total of 0.44 * 12 * 100 = $528 dollars of credit. The maximum loss in this play is $1872 if the market keeps going up  before November 19 and SPY ends up above 133.42.
Probability of success: 71.55%.
Days to expiration: 22

Check out demo-record


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