Tuesday, May 8, 2012

Potential 18% ROI in CF Credit Put Spreads

Market didn't like Spain's bailout so far today.  Lot's of macro data coming out later on in the week.  Not going to risk turning a profitable trade into a loser.  Closing these out today.

BTC CF June 12 160/155 put spreads for ($0.60-$0.25) x 100 x 5 spreads = $175 paid vs. $450 received = $275 profit

Adding this weekly chart to show why I'm continuing to hold these spreads, even though they're getting tested.  There is a long-term support line, dating back to the low from June '10.  It helps to look at multiple time frames to either support or refute your thesis for a given trade.

Ugly open to the market today with Greece & Eurozone fears.  Also seems like a delayed follow-through from last week's poor macro numbers.  Lots of blood in the streets.  This can sometimes be the best time to buy.

CF Industries Holdings (CF) recently broke out of its tight triangle/channel after earnings and has rebounded right back in.  Looking to keep the short strike on this one under the 200-day sma and the support line from the March low.

Right now the 160 strike represents an 11% downside buffer.  OptionsHouse trade analysis tool puts my max win probability at 77% on this trade.  A little low for me usually but willing to risk it a little when I'm under the 200-day and opening the position on a big down day.  Could see a bounce in the next few days, especially since it's almost bumping up against the lower Bollinger band.

@Mark_Lexus also concurs with me on this one.  See his blog post here.

Sold CF June 12 160/155 put spreads for ($3.11-$2.21) x 100 x 5 spreads = $450 premium received

No comments:

Post a Comment