Daniel.B

Put Ratio Backspread, Shorting the gap

Short
NYSE:IBM   International Business Machines Corporation
Well as this stock did gap down with good volume supporting the move. I decided to enter short through a Put ratio backspread. Reason being that this options' strategy simply limits my risk in regards to the large gap between 172.50 / 162.50. All in all, I'm looking for further downside to retest the 150.00 / 152.00 area.

For those wondering what a ratio backspread spread is I'll give you a link with a definition of it. Feel free to also just google put ratio backspread if you want to find a better explanation of it.
www.theoptionsguide..../put-backspread.aspx

The position:
  • Bought +2 100 AUG 15 157.5 Puts
  • Sold/Wrote -1 100 AUG 15 162.5 Puts

The trade:
  • Exiting at a loss if we get a daily close above the 200 Moving Average.
  • Exiting at a profit if we reach the 150 / 152 area.

Cheers, happy trading! =)
Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.