Update 2/25/2022: I exited my bull put vertical options spread on LVS, 21 days before expiration, for a $1.08 debit per contract/share, a profit before fees of $11 per contract. Shares were trading at $43.07, down $2.06 from the entry level.
The Implied Volatility Rank at exit was 59.1%, down 7.7 points from the entry level.
I exited because the position was within 21 days of expiration, with the exit price producing 9.2% of maximum potential profit. Under my rules for earnings plays, I exit at 25% of maximum potential profit up to 21 days prior to expiration. At that point, I exit for any amount of profit that will cover my fees.
Shares declined by 4.8% over 30 days for a -58% annual rate. The options position produced a 10.2% return for a +124% annual rate.
I have entered a short bull put options spread on LVS, using options that trade for the last time 51 days hence, on March 18. The premium is a $1.19 credit per contract share and the stock at the time of entry was priced at $45.23.
The Implied Volatility Ratio stands at 66.8%
The premium is 47.6% of the width of the positions short/long spread. The profit zone covers a 4.5% move to the downside and an unlimited move to the upside.
The risk/reward ratio is 3.2:1, with maximum risk of $381 and maximum reward of $119 per contract.
How I chose the trade. The trade was placed to coincide with LVS’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincided with the expected move of $2.00 either way, based on options pricing, which gives a price range of $43.24 to $47.23.
By Tim Bovee, Portland, Oregon, January 26, 2022
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.
All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at www.timbovee.com.
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