[Opening Bearish Call Spread on Holly Corp (HOC)/Simultaneously Buying Aug 55 Calls(HOCHK) and Selling Aug 50 Calls (HOCHJ)/Day Order/Limit $1.35]
Dear Member:
Holly Corp (HOC) reported lowered earnings compared to last year and has dropped down forming a double top near $50. I am placing an order to open a bearish calls spread by simultaneously buying the Aug 55 calls (HOCHK) and selling the Aug 50 calls (HOCHJ) for a limit of $1.35, day order. The spread between the 50 and 55's is $5 and that is the initial risk, but if I am filled, the market will pay me $1.35 before commission so the risk is reduced to $3.65 a share. The return on risk is 1.35 divided by 3.65 or 36.9% for 22 days provided no adjustment is made and the stock remains below $50 at expiration. It is currently around $48.81.
DISCLOSURE: At the time of publication, I have no position in HOC or its options.
Sincerely,
Bill Kraft
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