Stock / Symbol: SPDR Dow Jones Industrial Average / DIA
Option Strategy: [private_monthly]bull put spread[/private_monthly]
Price at trade post: $125.28
Reasoning: Between now and Decmber expiration, the standard deviation calculation for DIA puts it in a trading range between [private_monthly]119 to 132. I think the market is oversold, so I'm going to start out with a bull put spread here. On a pop up in the market, I'll add a bear call spread, making it an iron condor[/private_monthly]. This trade has a delta of 40, a positive theta of 3 and a negative vega of -15.35. The probability of success on this trade is 79%. If DIA trades [private_monthly]down to $122, we'll either stop out of the trade or adjust the position.[/private_monthly].
Trade Details:[private_monthly]
STO -7 DIA Dec12 119 puts
BTO 7 DIA Dec12 117 puts
for a min net credit of $0.20 per contract (day order, limit order). Try to get filled closer to the mid, currently at 0.24. If not filled today, ok to try again tomorrow.
Requirements:
Cost/Proceeds ($140)
Total Requirements $1260
Estimated Commission $21
[/private_monthly]
Max Risk: $1260
Max Reward: $140 or 11% [private_monthly]at $119+ by Dec 21
Profit Range: $118.85 + by Dec 21
Suggested Downside stop: @ $122
[/private_monthly]
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