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Friday, January 25, 2013

February 2013 $SPX Put Credit Spread

The following trade was entered:

Sell 5 SPX 1450 February Put @3.60
Buy 5 SPX 1445 February Put @3.10

Credit: $0.50 (0.50 * 100 * 5 = $250)
Margin: $4.50 (4.50 * 100 * 5 = $2250)
Break-even points: 1450.50 (Around 1501 when I entered the trade)
Probability of success: 88.18% when the trade was opened
Days to expiration:20
Max return on margin: 11.11%
Commissions: $15.00 (Assuming a very unfavorable $1.50 per contract)

I usually sell Puts only when the markets are oversold. However, in this case the reason is that I have double exposure already in the portfolio with the Calls sold in SPX and some other Calls in RUT. This trade is in order to mitigate that upside exposure. I wanted a market pullback, and have been waiting for it for two weeks. Now there's only 20 days left and it was today or never. I believe chances are small for the market to go down to these levels.

A snapshot of the market close for future reference

(Click on image to enlarge)


Check out Track Record for 2013

Related Articles:
Weekend Portfolio Analysis (01-26-2013)
Managing RUT Options positions
Weekend Portfolio Analysis (02-02-2013)

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