Stock / Symbol: Direxion Daily Financial Bear 3x / FAZ
Option Strategy: [private_monthly]calendar[/private_monthly];
Price at trade post: $43.30;
Reasoning: If we get a further pullback in the market, I think the financials will get hit hard. Playing my a downside thesis on the financials using a call calendar on the negatively correlated FAZ. The greeks on this trade are: 43 delta, 2.3 theta, and 13.5 vega. I'm using a [private_monthly]calendar[/private_monthly] because I'm expecting volatility to rise. For the long leg, I'm using the July expiration calls to give us plenty of time to continue selling near term weekly calls after the short [private_monthly] Apr13[/private_monthly] calls expire. Not risking too much on the trade so not using a downside stop at this time. Will stop out / take profits with FAZ[private_monthly] at/over $50.[/private_monthly]
Trade Details:[private_monthly]
BTO 2 Jul13 50 calls
STO -2 Apr13 50 calls
for a max net debit of $1.95 per contract (day order, limit order). The mid is currently at $1.88. If not filled today, it's ok to try again tomorrow.
Requirements:
Cost/Proceeds $390
Option Requirement $0
Total Requirements $390
Estimated Commission $6
[/private_monthly]
Max Risk: $390
Max Reward: $470 or 120% (at current volatility level) at $50 by Apr 19
Profit Range: 44 to 58 by Apr 19
Suggested Upside stop:[private_monthly] @ $50
Suggested Downside stop: NA
[/private_monthly]
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