Portfolio Strategy for May 1
Teresa, April 30, 2008 @ 10:36PM ET | Link | RSS | Read via Email | Start a Discussion
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Podcast for Tuesday: Option Spreads
Pete, April 29, 2008 @ 8:00PM ET | Link | RSS | Read via Email | 9 Comments
In today’s podcast [DOWNLOAD MP3 FILE] we demonstrated how to swing trade with bull call spreads and bear put spreads to manage risk and increase returns.
Bull Call Spread: COF
We set up a bull call spread using Capital One Financial as a study case.

| Strike | Symbol | Last | Chg | Bid | Ask | Vol | Open Int |
|---|---|---|---|---|---|---|---|
| 25 | COFFE.X | 27.1 | 0 | 27.8 | 28.9 | 10 | 841 |
| 30 | COFFF.X | 20 | 0 | 22.9 | 23.9 | 30 | 359 |
| 35 | COFFG.X | 19.5 | 0 | 18 | 19 | 20 | 1,224 |
| 40 | COFFH.X | 13.8 | Up 4.20 | 13.7 | 14.3 | 550 | 1,855 |
| 45 | COFFI.X | 10.3 | 0 | 9.6 | 9.8 | 2 | 3,068 |
| 50 | COFFJ.X | 5.6 | Down 0.60 | 5.7 | 5.9 | 59 | 18,026 |
| 55 | COFFK.X | 2.85 | Down 0.25 | 2.85 | 2.95 | 406 | 8,929 |
| 60 | COFFL.X | 1.05 | Down 0.15 | 1.1 | 1.2 | 448 | 9,286 |
| 65 | COFFM.X | 0.25 | Down 0.10 | 0.25 | 0.4 | 35 | 5,754 |
| 70 | COFFN.X | 0.15 | Up 0.05 | 0.05 | 0.15 | 10 | 2,596 |
| 75 | COFFO.X | 0.05 | 0 | N/A | 0.1 | 27 | 1,579 |
| 80 | COFFP.X | 0.05 | 0 | N/A | 0.05 | 2 | 1,151 |
| 85 | COFFQ.X | 0.05 | 0 | N/A | 0.05 | 0 | 854 |
COF, last at $53.67
Stop Loss at $43.95
Sell 1 June 55 Call @ $2.85 = $2.85 x 100 = $285.00 CREDIT
Buy 1 June 45 Call @ $9.80 = $9.80 x 100 = $980.00 DEBIT
Net Debit = $695.00 PER CALL
Max Profit = $55 - $45 = $10 x 100 = $1000 - $695 = $305/$695 = 43.88%
Bear Put Spread: POT
We set up a bear put spread using Potash Corp Saskatchewan as a study case.

| Strike | Symbol | Last | Chg | Bid | Ask | Vol | Open Int |
|---|---|---|---|---|---|---|---|
| 65 | PVZRM.X | 0.05 | 0 | N/A | 0.15 | 20 | 432 |
| 70 | PVZRN.X | 0.1 | 0 | N/A | 0.15 | 19 | 131 |
| 75 | PVZRO.X | 0.05 | 0 | N/A | 0.15 | 26 | 295 |
| 80 | PVZRP.X | 0.15 | 0 | N/A | 0.15 | 1 | 183 |
| 85 | PYPRQ.X | 0.15 | 0 | N/A | 0.1 | 105 | 968 |
| 90 | PYPRR.X | 0.25 | 0 | N/A | 0.1 | 1 | 482 |
| 95 | PYPRS.X | 0.05 | 0 | N/A | 0.2 | 10 | 183 |
| 100 | PYPRT.X | 0.1 | 0 | N/A | 0.15 | 4 | 834 |
| 105 | PYPRA.X | 0.35 | 0 | N/A | 0.35 | 1,011 | 2,161 |
| 110 | PYPRB.X | 0.2 | 0 | 0.2 | 0.3 | 2 | 2,113 |
| 115 | PYPRC.X | 0.2 | 0 | 0.2 | 0.45 | 3 | 1,027 |
| 120 | PYPRD.X | 0.45 | Up 0.10 | 0.4 | 0.65 | 9 | 1,078 |
| 125 | PYPRE.X | 0.55 | 0 | 0.65 | 0.8 | 80 | 3,280 |
| 130 | PYPRF.X | 1.1 | Up 0.55 | 1 | 1.15 | 49 | 5,274 |
| 135 | PYPRG.X | 1.55 | Up 0.50 | 1.45 | 1.7 | 102 | 1,601 |
| 140 | PYPRH.X | 2.35 | Up 0.80 | 2 | 2.3 | 108 | 5,196 |
| 145 | PYPRI.X | 3 | Up 0.95 | 2.85 | 3.1 | 235 | 1,959 |
| 150 | PYPRJ.X | 3.9 | Up 1.30 | 3.7 | 4 | 587 | 3,004 |
| 155 | PYPRK.X | 5.09 | Up 1.59 | 4.8 | 5.1 | 213 | 2,852 |
| 160 | PYPRL.X | 6.4 | Up 1.70 | 6.2 | 6.5 | 185 | 1,254 |
| 165 | PYPRM.X | 8.28 | Up 2.28 | 7.8 | 8 | 185 | 1,445 |
| 170 | PYPRN.X | 10 | Up 2.30 | 9.6 | 9.9 | 237 | 2,128 |
| 175 | PYPRO.X | 12 | Up 2.60 | 11.7 | 12 | 527 | 993 |
| 180 | PYPRP.X | 14.1 | Up 2.90 | 14 | 14.3 | 316 | 1,476 |
| 185 | PYPRU.X | 17.2 | Up 3.70 | 16.6 | 16.9 | 463 | 1,241 |
| 190 | PYPRV.X | 19.4 | Up 3.58 | 19.4 | 19.7 | 258 | 924 |
| 195 | PYPRW.X | 22.7 | Up 4.10 | 22.4 | 22.8 | 87 | 709 |
| 200 | PYPRX.X | 25.9 | Up 4.58 | 25.7 | 26.1 | 109 | 1,494 |
| 210 | PJNRB.X | 32.7 | Up 6.10 | 32.7 | 33.2 | 44 | 1,459 |
| 220 | PJNRD.X | 41.6 | Up 9.00 | 40.5 | 41 | 27 | 763 |
| 230 | PJNRF.X | 42.09 | 0 | 48.7 | 49.3 | 2 | 161 |
| 240 | PJNRH.X | 54.6 | Up 3.13 | 57.5 | 58 | 1 | 97 |
| 250 | PJNRJ.X | 64.1 | Up 8.21 | 66.5 | 67.2 | 3 | 92 |
| 260 | PJNRL.X | 68.1 | 0 | 75.7 | 77.7 | 20 | 69 |
| 270 | PJNRN.X | 66.7 | 0 | 84.8 | 87.1 | 10 | 90 |
| 280 | PJNRP.X | 75.8 | 0 | 94.5 | 96.9 | 10 | 30 |
| 290 | PJNRR.X | 88.1 | 0 | 104.3 | 106.7 | 10 | 20 |
| 300 | PJNRT.X | 111.5 | Up 14.90 | 114.2 | 116.6 | 29 | 20 |
| 310 | PJNRU.X | 113.1 | 0 | 124.3 | 126.6 | 10 | 10 |
| 320 | PJNRV.X | 131.8 | Up 9.30 | 134.3 | 136.6 | 4 | 10 |
POT, last at $182.50
Stop Loss not known, use April 23, 2008 swing high = $215.97
Sell 1 June 180 PUT @ $14.00 = $14.00 x 100 = $1400.00 CREDIT
Buy 1 June 210 PUT @ $33.20 = $33.20 x 100 = $3320.00 DEBIT
Net Debit = $1920.00 PER PUT
Max Profit = $210 - $180 = $30 x 100 = $3000 - $1920 = $1080/$1920 = 56.25%
Charts of the Day
The following charts were mentioned in today’s podcast. As usual, we applied InVivo.RMI indicators (available as a bonus to Portfolio Strategy subscribers) to the daily chart along with the widely-watched 50- and 200-day moving averages. The pink/cyan dots provide potential entry/exit signals while the price bars are colored red/yellow/green to identify relative performance.

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