Selling High Buying Low


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[responsivevoice_button rate=”0.9″ pitch=”0.5″ volume=”0.8″ voice=”US English Female” buttontext=”Play”]Here’s a trade from last week. It consisted of two credit spreads. One was a put spread, the other was a call spread The strikes for each spread were 1 dollar wide. I based the limit order on althe price action associated with each of the spreads which are displayed in the lower pane of the chart below. Both orders were filled at limit yielding a total credit of $1.46. At expiration, one spread was ITM, the other was OTM. The ITM spread had one dollar of intrinsic value, which goes in the loss column. The OTM spread expired worthless. Subtracting the one dollar from the 1.46 gain yeilds a profit of $46 on the trade with fees totalling $2.60 for a net gain of $43.40. The trade was open for about 45 minutes. Total risk for the trade was around $25.

Key take-away: Take advantage of volatility in spread pricing to open trades at a favorable level.

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