Tuesday, December 21, 2010

Hypothetical Put/Call Time Spread

Another really short term trade idea. Opening up both a call time spread, and put time spread simultaneously. I'm using google as an example.

The strike is 600 for all four legs of this strategy. The bet is that google will trade between 600 and 610 between now and Thursday i.e. two days of trading. If that happens one could potentially make $750 in two days. Downside is if google rallies or drops 5% then you lose $1.5K. the info is based on one contract each.

Trade summary:

Ticker: GOOG
Instrument: Option
Type: Put
Strike: 600
Maturity: 2010-12-23
Buy/Sell: Sell
Price: 1.7
Implied Vol: 28%

Ticker: GOOG
Instrument: Option
Type: Put
Strike: 600
Maturity: 2011-1-21
Buy/Sell: Buy
Price: 16.6
Implied Vol: 28%


Ticker: GOOG
Instrument: Option
Type: Call
Strike: 600
Maturity: 2010-12-23
Buy/Sell: Sell
Price: 5.25
Implied Vol: 28%

Ticker: GOOG
Instrument: Option
Type: Put
Strike: 600
Maturity: 2011-1-21
Buy/Sell: Buy
Price: 20.6
Implied Vol: 28%

*Implied vol is an estimate. Could be +/- 2%.

Payoff chart:

Posted by Avaneesh at 4:12 PM

2 comments:

  1. AjeshDecember 22, 2010 at 2:05 PM

    Techically, there is no difference between a put calendar and a call calendar, correct?

    ReplyDelete
  2. AvaneeshDecember 22, 2010 at 2:48 PM

    usually there will be because of the skew in volatility... should watch out for the tails though... if the euro crisis flares up tomorrow I will be in serious trouble...

    ReplyDelete

Subscribe to: Post Comments (Atom)