here is the trade:
Dec 09 call and put at 32 for a net debit of 7.40.
Risk Profile:
As you can see, i need the stock to move approximately $6 by 9/21 to breakeven. that is nearly 20% of the stock price. I am not too happy with this.
Trade Stats:
Net Debit: 2237.70
Max Loss: To expiration is 2219. however, i plan to sell at max loss of 800.
Max Profit: Infinite
BreakEven: at expiration, not good.
Strategy:
Wait for the sept bear correction. sell the put if in the profit. If by mid sept the correction does not come, get out with small loss. ($~500). i might want to hold on to the call because i do believe in the overall upward trend.
Lessons:
I did not do due dilligence =/
should have weighed the pros and cons better =/
this is somewhat of a gamble. from next time, need to better implement my rules!
1 comments:
after further review, i think this may not be a bad trade after all - not the best, but definately not that bad. there are a couple of reasons behind this:
- the own these options which can be considered assets. i need the value of these assets to rise. of course the value is based on the underlying's value and because of this i was assuming this is a bad trade. however, the vega of the trade is an important factor. as volatility increases, my asset's value will rise. although the underlying price has not changed much since i bought this straddle, the value of the straddle has been increasing.
- the theta is very little because the expiry is way out in Dec. so Dec. was a good expiration date to pick. This way i can wait out this trade for a while and hope for the volatility to rise.
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