Saturday, February 9, 2008

OPEN: ZMH Bull Diag., WMT Put Cal., & GOOG BRCS Vulture

ZMH Bull Diagonal:
Saw support near 65 and resistance since August at around 80.
Bought Jun 65 Call for $14.75 and Sold Mar 80 Call for $2.00 for a total debit of $12.75.
If not called out I make, 2.00/14.75= 13.5% yield in 1 month
If called out I make, 15-12.75/12.75= 17.6% ROI in 1 month
Stop loss set at 20%= $10.19

WMT Put Calendar:
I did this exact trade yesterday but sized my trade accidentally at 1 contract instead of 80. So I placed a limit order to fill at the exact debit of $1.20 that I had yesterday. Luckily, since the option value had not changed much at all today, I got filled as soon as I placed the order so now I have 80 contracts total of the Jun/Mar 47.5 puts for $1.20 debit.
1.50/2.70=55.5% yield in 1 month
No stop loss set since 50% would be set below $1.00. If it were set there would be too much risk of getting stopped out at the slightest move of the option.

GOOG BRCS Vulture:
A vulture is a vertical spread that is done very close to expiration, typically within the last week.
The risk with vultures is that because this is a directional trade and you have limited time, this must either be neutral or in your direction within that time for you to keep your credit. If not the risk is the difference between the strikes minus the credit. Do not trade this as a beginner. If you do, PLEASE trade this on paper only.
My friend OptionsMonkey brought this trade up so I thought I would try it out and size this trade for max loss with only using 1% of my portfolio.
Therefore we did a BRCS: I sold Feb 540 Call for $2.30 and bought the Feb 550 Call for $1.00 giving me a total credit of $1.30.
Max Profit= $1.30
Max Risk/Loss= $10-$1.30= $8.70
1.30/8.70= 14.9% in 1 week
No stop set on verticals.