Stock / Symbol: [private_monthly]Baidu / BIDU [/private_monthly]
Option Strategy: diagonal call spread adjusting to bull put spread
Entry date: Oct 26th; Price at trade entry: $113.09
1st Adjustment: Nov 24th with stock at $109.18
2nd Adjustment: Dec 1st with stock at $106.83
Price at this adjustment: $100
[private_monthly]
Current Position:
Long 1 Jan11 115 Call @ $9.24 (current value is $0.54)
[/private_monthly]
Adjusted Cost Basis: $4.64 per contract or $464 (with sale of 1 Nov 115 Call ($1.97) & 1 Nov 120 Call ($0.81); 1 Dec 120 Call ($0.85); and 1 Dec 115 Call ($0.97))
Current Cash generated: $460
Current Uncalled return: 49.78%
Reasoning: We're still very bullish on this stock but just want to give the trade more time. Basically, the stock just needs to be at it's current level by March expiration and we'll walk away with an 18% return.
Adjustment:
[private_monthly]
STC (sell) 1 Jan11 115 Call @ $0.48
then
Buy 3 BIDU Mar11 95 Puts @ $6.33 for $1,899.00
Sell -3 BIDU Mar11 100 Puts @ $8.65 for ($2,595.00)
for a net credit of $2.32 per contract
Requirements:
Cost/Proceeds ($696.00)
Option Requirement $1,500.00
Total Requirements $804.00
Estimated Commission $12.95
[/private_monthly]
Max Risk (adjusted): $804 + $464 = $1,268
Max Reward (adjusted): $231 @ $100+ (by Mar 18th)
Max Return: 18%
Profit Range: $99.23 + (by Mar 18th)
Chart:
[private_monthly]
[/private_monthly]
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