7/8
The verticals was a good trade. I was correct about the direction. The RUT broke down to the 480 level from about 500.
I managed some good yields on the trades.
Entry/Exit/%gain
3/2/14%
3/2.6/30%
3/2.6/30%
3/0.3/90%
7/2
The verticals was a good trade. I was correct about the direction. The RUT broke down to the 480 level from about 500.
I managed some good yields on the trades.
Entry/Exit/%gain
3/2/14%
3/2.6/30%
3/2.6/30%
3/0.3/90%
7/2
I closed a small portion of the puts for a $2.00 debit for a $1 gain (1/7 =+14%)
The trade is in a better position since it is further out of the money and I can have decay work in my favor.
6/30
In response to Mark's comment that I miscalculated the probabilities. I used a quick way of calculating the probability of sucess as:
Risk/width of strikes (7/10), which gives 70%. This is what ThinkorSwim has been teaching in their online chats/classes and also in the latest issue of ThinkMoney.
As of today at the close the 520Call has a delta of 36. The probability of expiring is 34%, which is close the delta. In other words 100-34= 66% is the probability of success. This closely matches the 70%. Here is the picture:
The risk graph analysis shows that by July expiration it has a 67.21% chance of the RUT below 520 and 32.79% closing above 520. I think that this matches the quick and dirty way of estimating the probabilities of success.
Mark, let me know if this is correct. I'm interested how you would calculate the probalilty of success of a vertical spread. To answer your other question on the -25% loss: It would be 25% of the credit and not the risk. So it would be 3*.25=.75. I got this idea from Dan Sheridan's webinars.
6/25
TRADE SETUP: SOLD -1 VERTICAL RUT 100 JUL 09 520/530 CALL @3.00 ISE, RUT MARK 503.15
Net Credit =$3.00
Max Reward =$3.00
Max Risk =$7.00
Probability of Profit =70%
Profit TARGET: 20%
Loss EXIT:-25%
TRADE MANAGEMENT: Need to monitor the trade if it reaches 25% loss. Will exit if it finds support in the 480s.
Did I plan my trade & trade my plan? -
2 comments:
You are making a serious error in the calculations.
1) The Jul 520C has a 42 delta. That the probability of its finishing OTM is only 58%.
Where are you getting the idea that the probability of profit is 70%. {I didn't calculate the delta of the hypothetical Jul 523 call, but it's more than 30.]
2) If you planning to exit when the loss reaches 25% [25% of what? the $7 maximum?] then the probability of success is MUCH less than your 70%. Obviously if you exit, you have a loss.
Mark
http://blog.mdwoptions.com/
Mark, I posted a response.
I'm interested in how you calculate the probability of success for a vertical spread.
I calculate it as the Riks/Width of spread as a rough estimate.
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