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Monday, March 26, 2012

Weekly Credit Spreads

Okay I've decided to disclose my weekly trades, for any of my readers who might want to papertrade and/or follow my actions just as a learning tool.

My fund is too small to do all my trading on Thursdays (when the Weeklies come out) so sometimes I do them the following Monday, after my "option requirements" are released by my broker.

So here we go:

Across the top the columns are:

the Probability (of success) percentage,
the Stock symbol,
the date of putting the trade on
the credit spread strategy
the Strike Prices of both the short and long options
(P) Puts (Bull Put) or (C) Calls (Bear Call)
the Number of Contracts (minus sign on the shorts)
the premium received and paid for the short and long
the extended value
the brokerage fees on that leg of the trade
the net after fees collected
the net CREDIT received (and to keep if the trade is successful)
the "option requirement" (and maximum loss possible) which the broker will hold**
the # of days until expiration
the % of reward to risk
the annualized % of reward to risk (I don't do trades that result in less than 40% annualized)

**this is calculated by the difference in Strike Prices (the spread) less the credit premium received on the trade. Ex: Strike price 170 minus Strike 165 is 5. x 100 shares is $500 per contract less net premium received. In the first trade below, it is $500 spread x two contracts = $1000 less premium received of $222.40. OptionsXpress will hold the $1000 and I have the $222.40 in my account, so the difference is my total RISK. (although that would be at expiration if you did nothing to save the trade if it was in trouble).




If anyone has questions, don't hesitate to ask here in comments, or at bevjackson at gmail.com.

Happy trading!

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