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OIH Income Trade - May 07 - Learn to Trade Options | #1 Options Trading Education

OIH Income Trade – May 07

Published on April 14, 2007

OIH Income Trade – May 07

April 14, 2007

After lot of paper trades, successful real trades on NKE for past 3months and considerable research I have chosen this underlying for initiating double calendars which has almost similar profile as double diagonal to diversify my income portfolio.

Here is the Income trade that I have opened for May’07:

  • Sell – May Put $155, May 150 Put 150
  • Buy – Oct Put $155 and Oct Put $150
  • ROM – It will vary as it can range from 0 to $580 on $1035 investment (by May expiration only. This will change after any adjustments or rolls). That is upto 56% for 1 month holding.
  • Breakeven points – $144.49 and $163.87

Here is the risk reward curve and transation details.

oih-risk-profile-dc-may-2007.png  oih-dc-transaction-mayoct-2007.png 

This is a very market neutral trade with delta only $2.66 and Gamma only -$3.25. However, the real beauty lies in Theta > Over $8/day/spread.

Watchout: OIH is volaitile and therefore this trade may require active adjustments vs other income trades.

Profitable trading, OptionPundit


  • ayjay says:

    Hi OP.

    I wonder how you would manage this trade for the following two cases:
    1) A quick run-up to 165;
    2( A slow run-up to 165

    I always enjoy paper trading some of your trades
    and appreciate your willingness to share your knowledge on options trading.

  • Jim kingsland says:

    nice new site design!

  • OptionPundit says:

    Thanks Jim.

    Ajay, there are several scenrios in which this trade can be adjusted. Since I am positive delta a run-up will be helpful, but too quick (i.e. 1 day types) will hurt the trade adversly. One of the quickest way will to make it delta positive again and therefore I may open OOM call calendar spread. If it is a slow process to move towards, almost same adjustment but theta willl help in dampening negative gamma.

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