Saturday, March 20, 2010

OEX March Position Outcomes

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options (the "ODD"). Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606. Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and educational purposes. In order to simplify the computations, commissions, fees, and margin interest and taxes have not bee in included in the examples used in this presentation. These costs will impact the outcome of all stock and options transactions and must be considered prior to entering into any transactions. Investors should consult their tax advisor about any potential tax consequences. No statement within this presentation should be construed as a recommendation to buy or sell a security or to provide investment advice.

Due to the stubbornness of the market to correct during March and the incorrect placements of my first March BWB Call Spread (505/515/530 1:5:4), the following was executed to limit my risk exposure and buy time.

Closed 505/515/520

1:3:2 BWB Call Spread
(0.60 credit )
Closed 510/505
2:6 Ratio Put Spread

(0.60 debit)
This was done to free up margin held
Closed 520/525/530 BWB Call Spread
(3.50 debit)

Following the above position closures, I was left with 6 525/535 Bear Call March Spreads (short vertical spread).
In order to buy time for the market correction I am expecting, I rolled this to April for a debit of 0.64 cents per contract.

My April Break even is now 531.19 for the 6 525/535 Bear Call April Spreads but I have an extra 28 days for the OEX to correct.

Max Risk: $2290
Max Reward: $3710

The new risk graph is as follows:

I will be looking at adding on some April Put BWBs and possibly some OEX Weekly Put BWBs.

-- randomjaywalking

No comments: