Shares rose by 1.9% over 24 days, or a +29% annual rate. The options position produced a -16.0% loss on debit for a -244% annual rate.
Although I exited the position for a loss, by rolling I reduced the loss to a third of what it would have been without the rolls. So although I didn't manage a profit, the rolls were not a wasted effort.
Update 12/4/2015: IWM remains above the zone of profitability and I've rolled it forward to DEC4 series of options, which complete trading on Dec. 24. I retained the strike prices.
Update 11/17/2015: I've rolled IWM forward to December expiration in anticipation of a market downturn, retaining the bear call spread through the transition.
I exited the November position for a $2.54 debit and entred the Decmeber position for a $2.10 credit. I shall defer calculation of results until after the series is complete.
The iShares Russell 2000 Index exchange-traded fund (IWM) closed below its 20-day price channel on Friday, sending a bear signal. The price has continued sharply lower the trading day following signal.
Click on chart to enlarge.
|IWM at 11:52 a.m. New York time, 30 days hourly bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
sold for a credit and expiring Nov. 21.
Probability of expiring out-of-the-money
The premium is $1.33, which is 44% of the width of the position’s wings. The stock at the time of purchase was priced at $109.16.
The risk/reward ratio is 1.3:1.
Decision for My Account
I've opened a position in IWM as described above.
-- Tim Bovee, Portland, Oregon, Sept. 28, 2015
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.License
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