|
PureBytes Links
Trading Reference Links
|
Mr. Johnson,
You stated you purchased 2 sep 35 calls for 2 and the stock subsequently
rallied to 34.5 where the options are at 5 and you would like to protect your
open profit. I suggest you consider the following;
Sell 4 sep35 calls and buy 4 sep 40 calls for what should be about 2 credit
on each.
this leaves you long 2 30's, short 4 35's and long 4 40's for a total credit
of 4pts.
Your new position is 2 butterflys and an additional 2 40 calls. If the market
breaks you can buy back the 4 spreads. If the market rallies sharply you can
sell out the 2 extra 40 calls. If the market remains between 30 and 40 till
expiry you can sell the butterfly for approximately the intrinsic value (
anywhere from 0 at the extremes to 5 at a price of 35). This will give you a
lot of action and commissions to yopur broker
but it will protect your profits.
Bruce Lawrence
|