Update 3/15/2022: The short puts in my bull put vertical options spread on FB were assigned, three days before expiration. There was no debit on the options. I retained the $8.20 per contract share entry credit and received 100 long shares of FB stock per options contract at the $300 per share strike price, which I sold for $188.43 per share.
That left my long puts in place. I exited them the same day as the assignment, for a $101.97 credit per contract/share, a profit before fees of $10,107 per contract. Shares were trading at $188.03, down $135.08 from the entry level.
Altogther, the result — options and shares combined — was a $1.12 loss before fees per contract share.
The Implied Volatility Rank at exit was 71.7, up 15.1 points from the entry level.
The results that follow are for the options combined with the shares that resulted from the assignment.
The share price declined by 41.8% over 41 days for a +372% annual rate. The options position and the shares resulting from assignment combined produced a 37.2% loss for a -331% annual rate.
I have entered a short bull put options spread on FB, using options that trade for the last time 44 days hence, on March 18. The premium is a $2.40 credit per contract share and the stock at the time of entry was priced at $323.51.
The Implied Volatility Ratio stood at 56.6%.
|FB-bull put spread||Strike||Odds||Delta|
The premium is 48% of the width of the position’s short/long spread. The profit zone covers a 6.5% move to the downside and an unlimited move to the upside.
The risk/reward ratio is 3.2:1, with maximum risk of $760 and maximum reward of $240 per contract.
How I chose the trade. The trade was placed to coincide with FB’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincide with the expected move of $19.29 either way, based on options pricing, which gives a price range of $304.23 to $342.8-.
By Tim Bovee, Portland, Oregon, February 2, 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.
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