Thursday, May 24, 2012

update to the $CF - PaperTrade Portfolio

17july - this month will be a good example of "not a bad problem to have"... since selling the july175 short call the stock has really taken off on the corn crop news with it near 207 now.. so at first glance you would think that the short call lost money since its way in the money.. in isolation that is accurate but the LEAP is gaining in value at same time so you are really just capping your profits.. so with 2days to go before july opex  im buying back the july 175 call and rolling it into the Aug175 short call for about $100 credit..is not much but with diagonals i really dont like rolling short calls up and out for a debit..especially when they are ITM like this.. my thesis for next month is bearish, that the stock has run too fast.. if after another month i am only able to roll to the 175 strike again i will instead close out the LEAP as well and take the profits from this "position" and walk away vs rolling month to month just for that $100 credit.. better to deploy this notional capital elsewhere then sit on it for $100 a month..as of today this "position" is up $800ish. this position in a google docs spreadsheet



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15 jun - another almost perfect pin for this trade, with 10min to go i closed the June160/165 ratio spread at $4.35. remember it cost zero to enter and got $435 profit out of it... i said below its double upside to 165. thats what we got.. this ratio spread profits and also the underlying LEAP profited. so to summarize what i did for June..sold a short call, took profits on it when there was only 87cents left, moved into a ratio spread for free to set up for an upside rebound into opex. as you can see the profit on the ratio far exceeded the remaining 87cents of premium i left on the table from the short call. so closing that out and entering another trade worked out this month, the near perfect pin was just gravy. now subtract the profit from the ratio from the cost basis of the Leap. here is this trade in the google docs spreadsheet . so even with the stock being down from when i entered the LEAP, the "position" is profitable by $500+. after taking profit in ratio, i also did the following for July:

Sold the July 175 short call at $4.05

"position" is now back to a diagonal spread

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4jun-   in the Paper Trade Portfolio , i am buying back the short jun 175 call and adding a call ratio spread for remainder of June opex... all three legs could be done for zero cost when i priced this out earlier

Buy to close - June 175 call
Buy to open - June 160 call
Sell to open - June 165 calls x 2

now have a DITM leap and a ratio spread, sets up for a rebound for rest of opex. also since there is only .87 left in the jun175 call.. the ratio profits from 160-170, giving you double upside potential to 165. above 170 at opex will just roll the ratio to a short call for credit. you are selling two of the 165calls , one of which is offset by the Leap..so its not a naked short call...broker considers it a Diagonal spread and a regular call spread. in spreadsheet you can see the profit from the short call helps lower the cost basis of your 2014Leap.


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24may - stock has show strength last few days , climbing back above the 200day today. so for the PaperTrade Portfolio will add the following trades:

Buy the Jan2014 140strike call for $51.45 ($5145)
Sell the June2012 175strike call for $4.30 ($430)

this is a diagonal spread. dont need to be concerned with the day to day movement of the stock since the long call option is for 2014..alot is going to happen in 2years.

1 comment:

  1. Comprehensive and very detailed graphs. Thanks sharing.

    ReplyDelete