Trading Edge 2020 Portfolio -Trade #7- TLT - Short Call Spread
Updated
Ticker: TLT
Position:
- Sell to Open (STO) $155 Strike Call Option (6th March Expiry)
- Buy to Open (BTO) $156 Strike Call Option (6th March Expiry)
- This will result in a net credit to your account, i.e. you will be paid for this trade
- Remember to (STO) the HIGHER delta option, otherwise this will result in a debit and the trade will then be structured bullishly rather than bearishly
- I am looking to get set for this trade for no less than a $30 Credit (this mean the maximum loss on this trade is $70)
- Ideally look to get set around $35 or higher
- I will run a position size so that i am risking no more than $700
- I will update tomorrow with the specific fill prices, unless i was unable to get set at the desired level, in which case the trade is no longer valid
Profit/ Loss/ Exit:
- Max Profit will be the total premium collected from the outset (although i will book a Buy to close order at 80% of maximum premium)
- Maximum loss will be the width of the spread ($1.00) minus the premium collected, i.e. $30 credit on a $1.00 spread = $70 maximum loss for this trade
- There is no official exit, although you can use the break even point as an exit if you wish, i would rather structure the trade so that the risk is as close to a 1:1 Risk/ Reward, also due to the volatility, a stop would likely impact the success of this sort of trade
Rationale:
- I am not looking at going long on any trades, given the extreme volatility, however we can use the volatility to our advantage by selling options and collecting some premium
- TLT is very extended and looks to be overdue for some mean reversion
-TradingEdge
Position:
- Sell to Open (STO) $155 Strike Call Option (6th March Expiry)
- Buy to Open (BTO) $156 Strike Call Option (6th March Expiry)
- This will result in a net credit to your account, i.e. you will be paid for this trade
- Remember to (STO) the HIGHER delta option, otherwise this will result in a debit and the trade will then be structured bullishly rather than bearishly
- I am looking to get set for this trade for no less than a $30 Credit (this mean the maximum loss on this trade is $70)
- Ideally look to get set around $35 or higher
- I will run a position size so that i am risking no more than $700
- I will update tomorrow with the specific fill prices, unless i was unable to get set at the desired level, in which case the trade is no longer valid
Profit/ Loss/ Exit:
- Max Profit will be the total premium collected from the outset (although i will book a Buy to close order at 80% of maximum premium)
- Maximum loss will be the width of the spread ($1.00) minus the premium collected, i.e. $30 credit on a $1.00 spread = $70 maximum loss for this trade
- There is no official exit, although you can use the break even point as an exit if you wish, i would rather structure the trade so that the risk is as close to a 1:1 Risk/ Reward, also due to the volatility, a stop would likely impact the success of this sort of trade
Rationale:
- I am not looking at going long on any trades, given the extreme volatility, however we can use the volatility to our advantage by selling options and collecting some premium
- TLT is very extended and looks to be overdue for some mean reversion
-TradingEdge
Note
Was able to get set for a $35 Credit on the spread, running 10x contracts, with a maximum risk of $65/ spreadTrade closed manually
Bought back the spread for $0.90 The strength in TLT has continued
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