Update 7/15/2022: I exited my short bear call vertical spread on STT, 35 days before expiration, for a $3.08 debit per contract/share, a loss before fees of $189 per contract. Shares were trading at $63.33, up $4.25 from the entry level.
The Implied Volatility Rank at exit was 68.8%, down 30.4 points from the entry level.
I exited on the day after entry after the stock moved opposite my trade after earnings were published. I exited at 80.8% of maximum loss.
Shares rose by 7.2% over one day for a +2626% annual rate. The options position produced a 61.4% loss for a -22,398% annual rate.
I have entered a short bear call vertical spread on STT, using options that trade for the last time 36 days hence, on August 19. The premium is a $1.19 credit per contract share and the stock at the time of entry was priced at $59.08.
The Implied Volatility Ratio stood at 99.2%.
|STT-bear call spread||Strike||Odds||Delta|
The premium is 47.6% of the width of the position’s short/long spread. The profit zone covers a 16.3% move to the downside and an unlimited move to the upside.
The risk/reward ratio is 3.2:1, with maximum risk of $238 and maximum reward of $119 per contract.
How I chose the trade. The trade was placed to coincide with STT’s earnings announcement, before the opening bell on the day after entry. The short strikes were set to coincide with the expected move of $2.42 either way, based on options pricing, which gives a price range of $56.66 to $61.50.
By Tim Bovee, Portland, Oregon, July 14, 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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