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March Option Writer Risk Management

HAVING TROUBLE PRINTING?
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SPY - The S&P 500 ishares have broken the intraday low set on 2/7 of 131.73.

Let's cover the March 143 Calls for $0.07 - 0.09 and sell the 149 strike for $0.42. You can do this by entering a spread order instead of two separate trades by entering the following:

LONG 1 SPY 143 CALL

SHORT 1 SPY 139 CALL

CREDIT $0.33 - $0.35

By selling the closer calls, the breakeven lines skew toward the left. This gives the position more room to the downside before it becomes a loser. However, the breakeven line is near $140. The vertical lines represent the estimated price in which the stock will lose $230 on the put and $143 on the call (143 = 108 + 35). These levels change depending on theta (time decay) and vega (Implied Volatility). As we approach expiration, the P/L curve should expand upward and outward to reflect capturing more time decay. The YHOO and SLB positions are structured this way as well. Hind sight is 20/20 with AAPL. The lighter blue represents the probability of expiring as of today. The breakeven points are basically within the light blue. That is good. I will continue to share my toys with you and hopefully educate you. Stay tuned for other updates.

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