Stock / Symbol: American Express / AXP
Option Strategy: diagonal call spread
Price at trade post: $43.87
Price at trade closing: $45.84
Max Risk: $764
Max Reward: $351 or 46% by Feb 2011 expiration
Profit Range: $43.35 + at Feb 2011 expiration
Max Reward Price: $46 at Feb 2011 expiration
Realized Reward: $156 or 20.42% (before commissions)
Reasoning: AXP reports earnings after market close today and since we're up 20% on this position, we're going to lock in a profit just in case the stock gaps down due to a disappointment.
A viable alternative to closing the trade here is to purchase 2 AXP Jan4 11 (Weekly) Calls at around $0.21 per contract. This will protect you in the event of a gap down and enable you to go for a max gain of $290 or 36.90%.
Trade Details:
STC 2 AXP Jul11 42 Calls
BTC -2 AXP Feb11 46 Calls
for a net credit of $4.60 per contract
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