[Opening bullish put credit spread on Imclone (IMCL)/Buying Nov 45 Puts (QCIWI) and selling Nov 50 Puts (QCIWJ)/Spread order/Limit credit of $1.60/Day order]
Dear Member,
I am opening a credit spread on Imclone. I am selling the Nov 50 puts (QCIWJ) $3.20 x $3.40 and simultaneously buying the Nov 45 puts (QCIWI) $1.55 x $1.65 for a limit of $1.60 credit. That means that a credit will actually come into my account, money will not be going out. For example, if I did 10 contracts on each side, I would receive a credit of $1600 in the account tomorrow. Since this is a $5 spread between the 50's I am selling and the 45's I am buying, my initial risk would be $5000 but the market will be giving me $1600 so I only have to have $3400 on hold and that will be my maximum risk. So on 10 contracts, I would take in $1600 on $3400 risk which is a 47% return on risk before commissions. As long as the stock stays above $50 I won't have to do anything. If it breaks below support at 50 I will have to adjust.
DISCLOSURE: At the time of publication, I have no position in the referenced options or the underlying stock.
Sincerely,
Bill Kraft
CutLoss, Inc.
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