Update 8/23/2021: I exited my bull put spread position on AMD 25 days before expiration, for a $1.12 debit per contract/share, the same before fees of my entry credit.. Shares were trading at $107.55, down $5.59 from the entry level.
My decision to exit was based on a reading of the chart. The price had reached a resistance point that had been touched twice before declining. With only four days to go before the day I manage positions — 21 days before expiration — I judged it best to get out of the position a touch early rather than risk another retreat from resistance. Exiting ensures the funds will be available for trading on August 31, the beginning of the next entry period, for the October monthlies.
Shares declined by 4.9% over 13 days for a -139% annual rate. The options position produced neither a return nor a loss — it was a wash, except for a few dollars in fees.
I’ve updated the chart, below.
I have entered a short bull put spread on AMD, using options that trade for the last time 45 days hence, on September 17. The premium is a $1.12 credit per contract share and the stock at the time of entry was priced at $113.14.
The implied volatility rank (IVR) stands at 40.5.
|AMD-bull put spread||Strike||Odds||Delta|
The premium is 29.9% of the width of the position’s wing.
The profit zone covers a 12.6% move to the downside.
The risk/reward ratio is 5.7:1, with maximum risk of $638 and maximum reward of $112 per contract.
I chose to entered a bull play based on an Elliott wave analysis of the chart. Using relative wave levels (rather than named degrees), the strike price of $100 is about 15 points above the start of wave 3 and about 15 points below the present high in that 3rd wave. The strike price, above which it’s all profit, is shown on the chart as a horizontal grey line.
By Tim Bovee, Portland, Oregon, August 3, 2021
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.
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