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Tuesday, January 10, 2012

February SPY Bear Call Spread

Demo-trading:
SELL 13 SPY February 135 Call (@0.67)
BUY 13 SPY February 137 Call (@0.32)

Credit: $0.35 (0.35 * 100 * 13 = $455)
Margin: $1.65 (1.65 * 100 * 13 = $2145)
Break-even point(s): 135.35 (Currently at 129.30, the SPX index would need to go up to around 1350 to cause a loss)
Probability of success: 75.69%
Days to expiration: 38
Max return on margin: 21.21%
Commissions: $39.00 (Assuming Interactive Brokers' schema for Canadians)

(Click on Image to enlarge)

Markets are around overbought territory. In order for this trade to be a loser SPY would have to go up to 135.35. Which is likely to happen but I'm betting it won't happen without at least a little retracement in the middle. I will probably close this trade before expiration as soon as there is some pullback in price action.

Check out demo-record

Related articles:
Weekend Thoughts (January 15, 2012)
Weekend Thoughts (January 21, 2012)
February SPY Bear Call Spread - Trade Closed (January 24, 2012)

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