S&P 500 & Nasdaq Analysis and Trends

[Chris McConnel]

>>> I got the August 22.5 Put at 1.00 and the August 55 Call at .85. <<<


Ok, let's run through some scenarios.

First, let's say that the judgement is in their favor, and the stock blasts off.

If the stock jumps to 50, and stops, you could probably bail on the trade for a minimal loss, depending on the IV drop.

If the stock jumps to 55, you can probably walk away flat on the trade.

If it gets above, say about 57, than that's where you start making money on the trade. Why 57? Because you have about $2 in options ($1 + $0.85 + slippage + commissions) and the strike of the call is 55, so 55 + 2 = 57.

So if the stock is trading at 41, it needs to move up 16 to make some money on the upside.


Now, how far does it have move to the downside, to make money on the trade, if the judgement is against them?


Their are other factors that can come into play as well, such as the stock making a big move up, where you can sell the call, and then the stock swings back down to 41, where you can sell the put. It all depends on how the market reacts, and how you play it.