My Second Trade (contd)

SHLD was my second trade entered on 16 March
The stock gapped up on good earning. I could get a reasonable credit of $70 on this by selling 125P. Here are a few charts explaining the trade. My technical stop is $126 which is the high of the gap.


Again, here is the economics of the trade:
Credit received: $70
Max Risk: $430
Max Reward: 16%
No of days: 33
This is not an ideal credit spread if I use my 1% per day rule. But this spread is almost $10 OTM and hence carries a higher probablity of success.



Happy Trading
Trader R

My 2 New Credit Spreads & How I found Them!!!

Hi,
Its been a while since I updated my trades. I recently entered into two Bull Put Spreads. One on GS and other on SHLD. Both stocks gapped up on good earnings.

Interestingly, I was looking at 'Insight' tab in Think or Swim platform where I found the trades in real time. Here is an example of what Insight tab is all about. (I am having trouble with uploading image...)


My Trades: 1) GS:
The stock gapped up on 14 March and IV shot further up. The IV is expected to go down over time as the uncertainity is over...
I had 2 choices:
Choice 1:
Sell 140 Put to open a credit spread for $70. This meant a max return of 16%.
However, 140 price point was $5 below Open price. So the chances of keeping the $70 was very high.




Choice 2
Sell 145 Put for a credit of $140 or so. This trade was valid only on 15th March had we broken the high of 14th March. This happened on Friday. I havent analysed it and I dont want to put more money on this stock... However this is how it would have looked on 14th:


Happy Trading!
Trader R

I was assigned yesterday!

This is the first time I was assigned. I was in a cheap calendar on BAC. It was a ITM Put calendar put on for $0.05.
On Friday I saw that the short put (March) had no premium left and was debating whether I should close the position and take a loss of $5/contract or see if the stock will move up (in my direction) on Monday (I wouldnt say Greed here... but something similar... maybe wanting to be right.)
Since the max loss was only $5/C, I took the risk. I had 7 contracts.
On Monday morning, I had 700 shares in my account with stock $2.5 OTM. My long put had about $0.05 of time value. I had the following options:
1) Sell the Put and Sell the shares
2) Exercise the Puts

I was not sure and I wanted to be out of this position. So I spoke with the TOS helpdesk. The person waled me thru the analysis and we concluded that exercising my put was the best bet.
So thats what I did!

If I would have closed the trade on Friday, I would have incurred a loss of $35 + 6 (commissions) = $41
As I had to exercise, my loss was $35 + $3 (commission for buying calendar) +$15 (commission for exercising) = $53.... I lost 30% more because I didnt follow the rules!

Trader R