[Opening Bullish Put Spread on Schlumberger (SLB)/Simultaneously Buying Apr 110 Puts (SLBPB) and Selling Apr 115 Puts (SLBPC)/Day Order/Limit $1.25 Credit]
Dear Member:
Schlumberger (SLB) is trading around 121.50 and the 50 day moving average is about to cross 115. I am placing an order to open a bulish put spread by simultaneously selling the Apr 115 Puts (SLBPC) and buying the Apr 110 Puts (SLBPB) for a credit of $1.25. Since the spread between the 115s I am selling and the 110s I am buying is $5, my initial risk would be $5 a share (times 100 times the number of contracts plus commission). However, since this is a credit trade, if filled, I will be receiving a credit of $1.25 a share. That means the risk would be reduced to $3.75 a share (times 100 times the number of contracts). If SLB stays above 115 and I make no adjustments until expiration, the return on risk would be 33.3% for a month and a day.
DISCLOSURE: At the time of publication, I have no position in the referenced options or the underlying stock.
Sincerely,
Bill Kraft for
CutLoss, Inc.
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