Boca_Bobby Basics

[boca_bobby]

FEB BUTTERFLY PLAY: ($MNX)

Let's test the waters with our first butterfly play. You may want to view the webinars listed on the iBox about the butterfly for a better understanding. Basically we do the following for $MNX:

Buy 10 $125/CALLS
Sell 20 $130/CALLS
Buy 10 $135/CALLS

According to TradeKing, the median price for this spread is listed @ $0.62. Each leg of this spread has a commish of $11.45 for the 10 contract legs. The 20 contract commish is $17.95 for a 3 leg total of $40.85. Let's remember that each derived contract is for 100 shares. So our risked capital is as such

$0.62 X 100 X 10 = $620 + $40.85 for commish = $660.35.

The closer we can get to a PPS of $130 on expiration, the higher our profit. But we will see profits in the area of about $126 through $134. This is an extremely slow developing strategy and we will need to let things simmer to reach it's full potential.

But we are looking for a minimum of 20% gain and we need to be ready to take it whenever it comes.