Update 5/4/2022: I exited my short bear call vertical spread on AMD, 44 days before expiration, for a $1.95 debit per contract/share, a loss before fees of $53 per contract. Shares were trading at $97.92, up $7.86 from the entry level.
The Implied Volatility Rank at exit was 66.1%, down 16.8 points from the entry level.
I exited on the day after entry, for 53.6% of maximum potential loss, because the position moved opposite the direction of my trade and I judged a fast exit to be the best way of limiting my loss.
Shares rose by 8.7% over one day for a +3,186% annual rate. The options position produced a 27.2% loss for a -9,921% annual rate.
I have entered a short bear call vertical spread on AMD, using options that trade for the last time 45 days hence, on June 17. The premium is a $1.42 credit per contract share and the stock at the time of entry was priced at $90.06.
The Implied Volatility Ratio stood at 82.9%.
|AMD-bear call spread||Strike||Odds||Delta|
The premium is 56.8% of the width of the position’s short/long spread. The profit zone covers a 12.6% move to the upside and an unlimited move to the downside.
The risk/reward ratio is 2.5:1, with maximum risk of $358 and maximum reward of $142 per contract.
How I chose the trade. The trade was placed to coincide with AMD’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincide with the expected move of $7.34 either way, based on options pricing, which gives a price range of $82.73 to $97.40.
By Tim Bovee, Portland, Oregon, May 3, 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.