Option Investor


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I know, I know, I know. There are seven weeks until April expiration. That's a long time to be exposed to the market, but I gave into the temptation. With premium getting more difficult to find, we're going to have to make a few concessions to the market.

What Are Our Choices?
a) Do we sacrifice safety by moving short strikes closer to where the underlying is trading?
b) Do we hold firm with the short strikes at (hopefully) solid support and resistance levels and expose ourselves to the market a few weeks longer?

I choose choice "B." So here's the plan (and the position). MSH Iron Condor. MSH trading at about 471.

Sell 15 MSH 510 April calls
Buy 15 MSH 520 April calls
Credit of about $.75

Sell 15 MSH 420 April puts
Buy 15 MSH 410 April puts
Credit of about $.45

Total net credit of about $1.20 with a potential profit of $1,800. You'll notice that I took advantage of the time factor to lower the bull put spread to 420/410 rather than the 430/420 that we have on as a March position. Does that balance out the additional time exposure? Not entirely, but it is a little safer. Maximum profit range is 420 to 510 and the maintenance is $15,000.

I'm posting this today at about Noon for those who want to take advantage of Friday order placement and not lose the premium that will erode away over the weekend.

Good luck and only do the trade if you're completely comfortable with the time exposure and the parameters. Adjust the number of contracts to your account size.

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