Wednesday, February 24, 2010

Updated OEX March Trades

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Last night's news of the consumer confidence falling well below the Street's expectations caused the OEX to move from the previous day's close of 508.28 to yesterday's close of 502.49

I continue to be bearish on the OEX hence I added another position last night to enhance my profit return.

Updated March Trades
Put BWB Spread

Long 1 x 500 Put

Short 2 x 485 Put
Long 1 x 450 Put
Net Credit = $15

Max Risk $2,000
Max Reward $1,515


Call BWB Spread

Long 1 x 505 Call
Short 5 x 515 Call

Long 4 x 530 Call Net Credit = $1,130 (I increased the ratio between the long and short legs in the Call BWB in order to get a better credit.)
Max Risk $4,000
Max Reward $2,130


Put BWB Spread # 2

Long 1 x 500 Put

Short 3 x 485 Put
Long 2 x 460 Put Net Credit = $120 (I increased the ratio between the long and short legs in the second Put BWB in order to get a better credit.)
Max Risk $3,380
Max Reward $1,620

By adding this tr
ade it changed my break evens but also increased my overall profit potential.
The new lower break even for the combined position is 470.74
The upper break even for the combined position is 520.61
Let's look at the new position risk graph (my mouse trap):





One new item I want to mention is the white line which depicts the profit of the position today.

You can see from the risk graph that any immediate move down of the OEX to the downside breakeven (470) would result in no losses (above the zero line) whilst any immediate move up until 510 to the upside would also result in no losses.

This makes for a high probability trade. Boring, but high probability. Now we sit and wait.

Happy trading! - randomjaywalking

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