Okay, here's a little different play than normal. With IV low across much of the market, I am looking at getting long a few beat up stocks with some synthetics.
Trade Setup:
+1 RIG Apr 21/ Mar 24 11/13 Diagonal @ $1.50
DTE: Short Call: 11; Long Call: 39
Max Win: If at $13 or above by Mar 24 - $50
Undefined if Short Call expires worthless
Max Loss: $150
Breakevens: $12.50
Trade Management: This trade is small to begin with, just a few testers I'm going to try. Best case scenario, the 13 call expires worthless by Mar 24 and then the stock continues to drift higher after (we can dream, right?). Worst case scenario, I'm out $150. In the event that we climb over $13 and my short call before Mar 24, I will just take my $50 and move on.
If the $13 call expires worthless and I keep that premium, eliminating all extrinsic value at this point, then I'll hold the 11 call and try to take about $75-80 on the whole trade. If I don't feel RIG is moving enough, I will make a discretionary call to sell another 13 call at the same expiration as my long to further reduce my risk. Either way, I'm okay with the small loss potential on this trade from trade entry.
Green is profit zone; Red vertical bar is Mar 24 expiration; Vertical black bar is Apr 21 expiration.
Trade Setup:
+1 RIG Apr 21/ Mar 24 11/13 Diagonal @ $1.50
DTE: Short Call: 11; Long Call: 39
Max Win: If at $13 or above by Mar 24 - $50
Undefined if Short Call expires worthless
Max Loss: $150
Breakevens: $12.50
Trade Management: This trade is small to begin with, just a few testers I'm going to try. Best case scenario, the 13 call expires worthless by Mar 24 and then the stock continues to drift higher after (we can dream, right?). Worst case scenario, I'm out $150. In the event that we climb over $13 and my short call before Mar 24, I will just take my $50 and move on.
If the $13 call expires worthless and I keep that premium, eliminating all extrinsic value at this point, then I'll hold the 11 call and try to take about $75-80 on the whole trade. If I don't feel RIG is moving enough, I will make a discretionary call to sell another 13 call at the same expiration as my long to further reduce my risk. Either way, I'm okay with the small loss potential on this trade from trade entry.
Green is profit zone; Red vertical bar is Mar 24 expiration; Vertical black bar is Apr 21 expiration.
Trade active:
On today's down move, closed the short call out for a $.04 debit. Cost basis on the long 11 call option is now $1.54 ($154).