Recap :I reviewed directional option trading strategies in Part-1 then I discussed (OP reader Avi’s) one non-directional option strategy in Part-2. Now I am going to share another non-directional strategy i.e. backspread (Opposite of backratio) for Google earnings. Here is what the trade might look like:

• Sell x call GOOG Jan 470 and purchase 2x Feb call GOOG 510. Credit received is $855/backspread and margin required is $3145.
• The break even points are $478 and $540
• Here is the risk/reward chart –>

Just one of many more ways to play non-directional. Risks associated with this strategy are mainly two i.e. 1) if GOOG remains in between $478 and $540 by Feb expiration and if we don’t take any action we’ll lose money, and 2) When the volatility drops after earning annoouncement, it is going to hurt my long options.

If you would like to know about backspread, please click here Backspread

Cheers and good luck,

Profitable trading, OptionPundit

Credit spreads- Love it or hate it!

Congratulations to all those who witnessed HOLX’s conference call and saw the huge jump in the stock price as the call was going on. Since it was in my list, but I didn’t play earning, I decided to participate as soon as the volume picked up. As I don’t play without hedge, my play was a bull put credit spread. I am already out from the trade after a kool 17.24% return in few hrs. ($0.50 on $2.90 per contract).

Here are the charts and my transaction reports: 

    

This is a personal post to share one of my “unforgettable” moment when I got an opportunity to meet with Mr Warren Buffet face to face. We went to see him in his office in Omaha and had 2 hrs Q&A with him. I was part of University of Texas MBA student delegate that was invited by Mr Buffet few years back.

What a great opportunity to see, listen and ask fquestions from the living legend. He answered question on broad range of topics including investments, his past investments, his success and failures, his struggle, his love with coke and wonderful discussion about priority management. It was such a vivid conversation that I literally memorized the conversation and compiled notes after coming back to hostel. One of those moments that I shall cherish whole life!

I shall fine tune and post my personal notes based upon what I learned from that conversation.

Cheers and profitable investing folks,
OptionPundit