ANZ - Roll Out
ANZ was trading at the upper strike today, market has been very volatile again… and its one day before options expiry so i’m a bit cautious for this trade and decide to not take the chance and roll it out for the next month.
The Trade (ANZ) - Traded on 13th July 2007
Sell Jul $29.26 Puts @ $0.195
Buy Jul $28.78 Puts @ $0.08
Expiry = 26/07/2007
Share/Contract = 1042
Max Profit = 0.115 (0.195-0.08)
Max Risk = 0.365 [(29.26 - 28.78 ) - (0.195-0.08)]
Return on Risk = 31.51%
Breakeven = $29.145
I opened 10 contracts:
Reward for trade (excluding fees) $1,198.3
Reward for trade (including fees) $988.90
Value At Risk $3,803.3
Closing the above trade - Traded on 25 July 2007
Buy Jul $29.26 Puts @ $0.14
Sell Jul $28.78 Puts @ $0.005
It cost me $0.135 x 10 contract = $1,406.7
Remember I received $0.115 x 10 contract = $1,198.3 at the beginning
So, net loss $208.4
All up ANZit cost me $627.2 to close my position - brokerage etc. inclusive (in short, I made a loss on this trade)
Open the same trade or a variation of the same trade for the next month (this is what I did)
Opening a trade for next month (ANZ) - Traded on 25 July 2007
Sell May $29.0 Puts @ $0.335
Buy May $28.5 Puts @ $0.20
Expiry = 30/08/2007
Share/Contract = 1000
Max Profit = 0.135 (0.335-0.20)
Max Risk = 0.365 [(29-28.5) - (0.335-0.20)]
Return on Risk = 37%
Breakeven = $28.865
I opened 10 contracts:
Reward for trade (excluding fees) $1,350.0
Reward for trade (including fees) $1,140.6
Value At Risk $3,650 + previous loss amount ($627.2) = $4,277.2
This trade is actually tied in to the previous trade which loss $627.2
If this trade is successful then the net profit is $1,140.6 - $627.2 = $513.4 i.e. I would make less money over a longer period of time. Keep in mind I did increase my risk from by opening more contracts…
