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Wednesday, December 17, 2014

Spiders (SPY) Dec Put Options

10/29/2014 (11:13 am, PT)  FP

Ratio spread: 

+3 December 2014 $195 puts at $3.70 (long puts)
-6 December 2014 $191 puts at $2.55 (short puts)

Net credit:  $1.40
Cash received:  ($1.40) (3) (100) =  $420

Why did I place this trade?
  • top of stochastics (I was slightly bearish) (see chart)
  • probability of success was approximately 68%
  • potential max profit:  $1620

12/17/2014 (10:59:06 am, PT)

sell to close the 3 long puts at $0.48
buy to close the 6 short puts at $0.16

Net CREDIT:  $0.16

It is VERY UNUSUAL to receive a CREDIT when buying back a ratio spread. This gave me a profit that's even higher than my original credit.  That's why I closed the trade instead of allowing the options to expire on 12/19.

TOTAL NET PROFIT:  $438.09             SUCCESS!


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