Option Investor


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ADJUSTING OUR "SURE THING"Well, I'm convinced. I think the market has proven that it's likely the trend has changed. The bloom is off the rose. So, it's time to make the appropriate adjustment to our "sure thing" credit spread.

We're going to close our February 1280/1255 bull put spread at a cost of $13.20. We currently have four contracts. So, our debit will be $5,280.

We will roll that into the March 1280/1305 bear call spread for a credit of about $7.80. To replenish the $5,280, we will need to trade 7 contracts. Our credit will be $5,460. That will replenish the $5,280 and give us $180 in spending money.

Our February trade has now become a March trade, but we're patient. Our maintenance, which was $10,000, is now $17,500. Now we get to root for the SPX to continue down.

It's currently at about 1263. Our short call is at 1280. Therefore, we have a cushion of about 17 points.

Take care and trade smart!!


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