Stock Symbol: [private_monthly]SSO[/private_monthly]
Option Strategy: Bear Call Spread
Risk Level: low
Max Risk: $448
Max Gain: $352 = 78% return
Price for Max Gain at expiration: $39
Break Even at Expiration: $39.88 (2.39% higher than current price)
Reasoning: We expect that the market is ready for a pull back and believe that the [private_monthly]ProShares Ultra S&P500 - SSO[/private_monthly] will drop to at least $35 by October expiration. This strategy takes full advantage of the fact that nearly 80% of all options expire worthless.
Trade Details:
[private_monthly]
Sell -4 SSO OCT10 39 CALL $1.52 ($608.00) Credit
Buy 4 SSO OCT10 41 CALL $0.64 $256.00
Requirements:
Cost/Proceeds: ($352.00) Credit
Option Requirement: $800.00
Total Requirements: $448.00
Estimated Commission: $12.95
[/private_monthly]
Chart:
[private_monthly]
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Do you provide stops for each position? Is there a general rule for a 10% trailing stop or do you not want to be stopped out and leave the stop decision to the subscriber?
Unlike stocks, options are subject to wild intra-day swings. In fact, its not uncommon for an option to fluctuate by 20 to 30% up or down during a single day. Therefore, we do not place hard stops on our trades. If you look at our trading record, you’ll see that we do occasionally close out a trade for a loss, but we only do so when it seems clear that the underlying stock or ETF has moved far enough against us. Remember, our main premise is that nearly 80% of all options expire worthless. That means that even if we’re wrong about a stocks direction, we still have a nearly 80% chance of making a profit from the trade. Additionally, we structure our covered calls and many diagonal spread trades such that we theoretically never need to close the full position for a loss. Lastly, our service takes care of all of the guesswork for you. Prior to entering or closing any trade, we notify you first.