Stock / Symbol: McDonalds / MCD
Option Strategy: calendar call spread
Trade entry date: Jun 28
Price at trade entry: $87.88
Price at Jul 13 adjustment: $92.20
Price at this adjustment: $88.10
Current Position:
[private_monthly]
Long 3 MCD Jan13 87.5 calls
Short -3 MCD Aug12 87.5 calls
at a debit of $2.15 per contract
+
Long 1 MCD Jan13 92.5 call
at a debit of $3.85 per contract
Reasoning: While we did the prudent thing (with MCD trading at $92.20) to protect the position to the upside by purchasing a protective call, it's frustrating that the original calendar is currently up around 15%. We're going to adjust by [/private_monthly]closing out the original calendar call spread for a profit and then selling a Dec12 92.5 strike call against our long Jan13 92.5 call. By doing this, we can only lose another $30 on the trade, but have an opportunity to make up for some of the loss with MCD trading near 92.5 in a couple of months from now.
Trade Details:
[private_monthly]
STC 3 MCD Jan13 87.5 calls
BTC -3 MCD Aug12 87.5 calls
for a min net credit of $2.40 per contract (current bid/ask is $2.45 / $2.55). Return at current bid is 13.95%
then,
STO -1 MCD Dec12 92.5 call
at the bid price (current bid/ask is $1.03 / $1.08)
[/private_monthly]
Max Risk: $170 (adjusted down from $1,020)
Max Reward: ($55) by Dec 21
Profit Range: NA
Suggested upside stop: NA
Suggested downside stop: NA
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