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CFC as bearish play - Learn to Trade Options | #1 Options Trading Education

CFC as bearish play

Published on August 14, 2007

CFC as bearish play

August 14, 2007

(for details pls visit www.OptionPundit.net)

Keep an eye on CFC as it drifts lower, slowly towards 23.5, it’s 52wk low. There are a few ways to play this underlying.

  • Straight put (I lost on that the very first time I talked about this)
  • Bear call spread, the losses are limited (you may choose to open Aug 27.5/30 bear call spread, $0.45 credit for $2.05 margin, for 4 days holding). I don’t expect any major news coming out in next 3 days (but there is always a remote possibility)
  • Open a put diagonal (the beauty of this trade is that with IV rise, value of PUTs will increase, and with stock’s fall, value of puts will increase as well). However, if stock crashes for some reason, u r open to risk unless you hedge it.
  • OOM put calendar. You may choose a strike you like or you think is a possible pinning point.

Choose whichever strategy you like, there maybe more, but be careful. High IV means high risk as well. Just like it bounced back when i suggested last time, it may revert again as well. But hey, who said the life was so easy. If it were, neither I was writing, nor you were reading this 🙂

 Cheers and profitable trading, OP

Disclaimer : I have a bearish position on CFC.

4 Comments

  • dan says:

    CFC is forming a ” W ” bottom here. Stock has support in this area. It can bounce and smack any bearish positions from here. Be careful what you wish for. This is a simple trading pattern exhibited by downsliding equities.

  • optionnewbie says:

    Keep in mind, Thursdays economic news on housing starts and building permits is likely to be moderate to poor. This creates potential bearish opportunities.
    Also, at todays close the Dow broke resistance and Bullish Percents for finance sector dont look so hot. CFC may turn out to be one of many put option plays this week.

  • OptionPundit says:

    Dear Dan, thanks for sharing your concern. I am not trading this based on technical parameters (except 52wks low indicator). I am trading it more on psychological reasons. But you may be right and it may bounce back. It has already 10% profit and I shall be getting out in the next trading session.

    Dear Optionnewbie, thanks for sharing the information. This is a helpful piece and surely may help in opening-up some new positions. $XBD could be a less volatile play than individual components. Cheers.

  • […] mentioned about CFC for bearish play y’day and also sent an alert to registered users advising to book profit at the opening.  […]

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