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XLB PUT SPREAD 41/36 APRIL

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As I mentioned in the Friday evening WATCH list, we might be considering placing a put spread on the XLB

The following credit put spread is being recommended for XLB. When this position is filled you will have a short $41 put and a short $42 call, creating a strangle with our short positions. This position should not require anymore margin requirement it you have the right broker-dealer, since you already have the XLB call credit spread on account.


We are recommending the following specific put write on XLB. The goal of this position is to hedge slightly our lost on our call credit spread if XLB closes above $42 at expiration


XLB $42.18

SELL XLB-PO KLB MAY $41.00 PUT CREDIT= $0.40
BUY XLB-PJ KLB MAY $36.00 PUT DEBIT $0.05
NET CREDIT = $0.35

INITIAL "NET- CREDIT TARGET= $0.35 or $35.00
POTENTIAL PROFIT (x 10 CONTRACTS @ $0.35 = $350.00
MARGIN REQUIRE. (x 10 CONTRACTS $4,650.00
RETURN ON INVESTMENT= 7.53%
EXIT STRATEGY = 1. WATCH LIST 2. MAXIMUM LOSS SPREAD PRICE DIFFERENCE $5.00
1. STOCK WILL BE PLACED ON WATCH LIST IF STOCK PRICE DROPS TO: $41.50
2. ON SPREADS WITH 2.50 or less difference in STRIKE PRICES the Difference
IN THE STRIKE PRICE WILL BE OUR MAXIMUM EXPOSURE - WE WILL NOT USE STOPS ON THOSE POSITIONS. THEY WILL GO ON THE WATCH LIST AND BE FOLLOWED WITH INSTRUCTIONS AS TO HOW TO PROCEED OR/WHAT EXIT POINT NEEDS TO BE ESTABLISHED

INDEX OPTIONS, SPYDER AND HOLDER ISSUES:
In ADDITION IF WE ARE USING A INDEX OR HOLDER OPTION WE WILL RECOMMEND WHEN A STOP SHOULD BE ADDED, IF THAT TIME BECOMES NECESSARY


IF XLB closes between $41 & $42 both sides of our credit spread, the call spread and the put spread would expire worthless. ( SEE BELOW )





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