Ok thanks.......I actually made my first mistake on this trade, I didn't check when earnings where. I found out the date after I placed the trade :eek: .
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SNDK - my first credit spread
- Thread starter lenwhistler
- Start date
Ok thanks.......I actually made my first mistake on this trade, I didn't check when earnings where. I found out the date after I placed the trade :eek: .
Quote from lenwhistler:
My main concern is getting exercised on the ITM short puts before expiry.
SNDK stock: $57.52
SNDK APR 60 PUTS: $4.70 bid.
No need for concern yet. You have to understand that the put buyer on the other side would have to be a <b>complete moron</b> to exercise his long puts while they have any kind of time value priced in. You understand why, right?
Secondly, for various reasons it is <i>generally</i> better strategy to use <b>calls</b> for bull spreads and puts for bear spreads.
Len, I would recommend you look at Thinkorswim. I am very impressed with everything over there, as are most people. Just click on the BROKERS link at the top af any page.
Don-
Don-
Quote from Rearden Metal:
SNDK stock: $57.52
SNDK APR 60 PUTS: $4.70 bid.
No need for concern yet. You have to understand that the put buyer on the other side would have to be a <b>complete moron</b> to exercise his long puts while they have any kind of time value priced in. You understand why, right?
I never thought of it until now.
* Put buyer puts me 500 shares of SNDK @ $60.00
* $60.00 - $4.70 = $55.30
* $57.52 - $55.30 = $2.22
* Stock sold @ $2.22 discount.
Quote from Rearden Metal:
Secondly, for various reasons it is <i>generally</i> better strategy to use <b>calls</b> for bull spreads and puts for bear spreads.
Those then would be debt spreads instead of credit spreads, correct?
Quote from traderdon56:
Len, I would recommend you look at Thinkorswim. I am very impressed with everything over there, as are most people. Just click on the BROKERS link at the top af any page.
Don-
I have heard of them, but never visited the site. Thanks for the tip.
I will check them out.
Quote from traderdon56:
Len, I would recommend you look at Thinkorswim. I am very impressed with everything over there, as are most people. Just click on the BROKERS link at the top af any page.
Don-
Ditto. The analytics are awesome. You can set up a demo account to try it out for 10 days.
Just a question... Have you checked out optioncoach's thread- SPX Credit spread trader? You have probably seen it. I've been lurking there for months and have learned a ton. It just seems as though index spreads are easier to deal with as far as earnings season goes. IV is definitely an issue right before an issue comes out with earnings.
Hope this helps a bit.
Quote from lenwhistler:
SNDK @ $58.74
Sell April 60 put @ $3.90
Buy April 55 put @ $1.85
5 contracts each.
Maximum gain $1,025
Maximum loss $1,475
Commissions not included.
I sold the ITM options to capture the premium and bought the OTM options as loss insurance. Comments welcome.
Took only 2 days for this to "tank". I will update when I close, hopefully SNDK can bounce back to $60.00 before April 21.
Quote from lenwhistler:
SNDK @ $58.74
Sell April 60 put @ $3.90
Buy April 55 put @ $1.85
5 contracts each.
Maximum gain $1,025
Maximum loss $1,475
Commissions not included.
Position still open after almost 2 weeks. Interesting to see first hand how the upcoming earnings (April 20) is affecting the IV to my disadvantage.
SNDK @ $59.17
April 60 put @ $3.60
April 55 put @ $1.30
Quote from lenwhistler:
SNDK @ $58.74
Sell April 60 put @ $3.90
Buy April 55 put @ $1.85
5 contracts each.
Maximum gain $1,025
Maximum loss $1,475
Commissions not included.
Position closed
SNDK @ $64.26
Buy to close April 60 put @ $1.15
Sell to close April 55 put @ $0.25
Gross Profit $575.00
Commissions $140.00
Net Profit $435.00
I closed before expiry because of the earnings this Thursday.