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Wednesday, August 29, 2012 4:32:08 PM
I am doing well.
I like those weekly reports put out by Ivolatility.com.
An interesting way to play this historically anticipated downtrend in the market is to open up a bearish butterfly spread on SPY.
SPY currently around $141.50.
Open up a 1-2-1 butterfly Call spread at the October expiration 131-136-142. Midpoint fill would be a $82 debit per spread.
Maximum loss would be the $82 debit per contract. Maximum gain would be $413 or 477% return.
It benefits from a 5:1 reward/risk ratio.
Plus, since a butterfly has a net Negative Vega position, if the position moves away from you, the IV would be expected to drop accordingly, so this would mitigate any losses.
See chart below to see todays PnL curve and at expiration. Likely, you would unload before expiration regardless of the direction of the security move.
I like those weekly reports put out by Ivolatility.com.
An interesting way to play this historically anticipated downtrend in the market is to open up a bearish butterfly spread on SPY.
SPY currently around $141.50.
Open up a 1-2-1 butterfly Call spread at the October expiration 131-136-142. Midpoint fill would be a $82 debit per spread.
Maximum loss would be the $82 debit per contract. Maximum gain would be $413 or 477% return.
It benefits from a 5:1 reward/risk ratio.
Plus, since a butterfly has a net Negative Vega position, if the position moves away from you, the IV would be expected to drop accordingly, so this would mitigate any losses.
See chart below to see todays PnL curve and at expiration. Likely, you would unload before expiration regardless of the direction of the security move.
Si vis pacem, para bellum — If you want peace, prepare for war.
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