Hi All,
First let me apologize for my last post, the first
chart was incorrect. Somehow the second chart, which was correct,
overwrote the first when I copied it into the e-mail.
The chart below is correct and based on the
statement Ben sent (also attached). Unfortunately he was less
than truthful in his original explanation of his trade, unless I am misreading
something.
He originally stated that he bought Feb 37 puts
when actually it was a March 36. More importantly, he originally stated
that he sold March 39 call however the statement shows he sold a June
37 call. This is important because in the originally trade the
puts would only need to be rolled once. In reality, he will need to
roll them in March, April, and May, which would negate any profit and probably
create a loss.
If he closes out the trade early he could take a
loss on the short calls or the QQQ and he might need to buy the long puts
back, either way this substantially reduces his profit or might create a
loss.
He could skip the April and May put roll over
by buying June puts in March but he would pay a lot of time premium to do so,
thus eliminating his profit or even creating a loss. He could forgo the
put rollout at March expiration and convert the trade to a covered call,
but then he assumes considerable risk (in which case buying the original put was
a waste of money). Furthermore if he rolls the short calls out to collect
more premium, it could make matters worse depending on when he does it (right
now the next available month is Sept.)
IMHO there is a great probability that Ben will
take a net loss on this trade. Had he set it up as a covered call,
a collar trade, or even his original covered call with one month put
protection, he would have had a much better chance, but only time will
tell.
Has he found the cash cow that will make us all
rich? Definitely NOT.
Good luck and good trading,
Ray Raffurty
<TABLE style="WIDTH: 946pt; BORDER-COLLAPSE: collapse" cellSpacing=0
cellPadding=0 width=1257 border=0 x:str>
<COL style="WIDTH: 84pt; mso-width-source: userset; mso-width-alt: 4096"
width=112>
<COL style="WIDTH: 52pt; mso-width-source: userset; mso-width-alt: 2523"
width=69>
<COL style="WIDTH: 53pt; mso-width-source: userset; mso-width-alt: 2560"
width=70>
<COL style="WIDTH: 44pt; mso-width-source: userset; mso-width-alt: 2121"
span=2 width=58>
<COL style="WIDTH: 54pt; mso-width-source: userset; mso-width-alt: 2633"
width=72>
<COL style="WIDTH: 58pt; mso-width-source: userset; mso-width-alt: 2816"
width=77>
<COL style="WIDTH: 52pt; mso-width-source: userset; mso-width-alt: 2523"
width=69>
<COL style="DISPLAY: none; mso-width-source: userset; mso-width-alt: 2340"
span=2 width=0>
<COL style="WIDTH: 68pt; mso-width-source: userset; mso-width-alt: 3291"
width=90>
<COL style="DISPLAY: none; mso-width-source: userset; mso-width-alt: 2816"
width=0>
<COL style="WIDTH: 61pt; mso-width-source: userset; mso-width-alt: 2962"
width=81>
<COL style="WIDTH: 67pt; mso-width-source: userset; mso-width-alt: 3254"
width=89>
<COL style="WIDTH: 35pt; mso-width-source: userset; mso-width-alt: 1718"
width=47>
<COL style="WIDTH: 52pt; mso-width-source: userset; mso-width-alt: 2523"
width=69>
<COL style="WIDTH: 78pt; mso-width-source: userset; mso-width-alt: 3803"
width=104>
<A
name=RANGE!A1:Q41>Deal Details:
<SPAN
style="MARGIN-TOP: 0px; Z-INDEX: 25; MARGIN-LEFT: 0px; WIDTH: 90px; POSITION: absolute; HEIGHT: 22px; mso-ignore: vglayout"><IMG
width=90 v:dpi="96" v:shapes="_x0000_s5312"><SPAN
style="mso-ignore: vglayout2">
<TD class=xl102 style="WIDTH: 52pt; HEIGHT: 15pt" width=69
height=20>SAMPL
<TD class=xl103 style="BORDER-LEFT: medium none; WIDTH: 53pt"
width=70>
4
<TD class=xl44 style="WIDTH: 120pt; mso-ignore: colspan" width=159
colSpan=4>Analysis Parameters:
<SPAN
style="MARGIN-TOP: 13px; Z-INDEX: 4; MARGIN-LEFT: 19px; WIDTH: 166px; POSITION: absolute; HEIGHT: 54px; mso-ignore: vglayout">
<IMG class=shape height=54
alt="Cycle through time to Expiration"
v:shapes="_x0000_s5137">
<IMG class=shape height=52
v:shapes="_x0000_s5136"><SPAN
style="mso-ignore: vglayout2">
<TD class=xl35 style="WIDTH: 48pt; HEIGHT: 15pt" width=64
height=20>
Stock price
<TD class=xl43 style="BORDER-TOP: medium none" align=right
x:num="35.35"><A
name=RANGE!B2>35.35
Deal Date
<TD class=xl33 style="BORDER-TOP: medium none" align=right
x:num="37301">2/14/2002
<TD class=xl35
style="WIDTH: 58pt; HEIGHT: 25.5pt; mso-ignore: colspan-rowspan" width=77
height=34 rowSpan=2>
<SPAN
style="MARGIN-TOP: 0px; Z-INDEX: 39; MARGIN-LEFT: 0px; WIDTH: 43px; POSITION: absolute; HEIGHT: 17px; mso-ignore: vglayout"><IMG
class=shape height=17 alt=Select
v:shapes="_x0000_s5404"><SPAN
style="MARGIN-TOP: 17px; Z-INDEX: 40; MARGIN-LEFT: 0px; WIDTH: 43px; POSITION: absolute; HEIGHT: 17px; mso-ignore: vglayout"><IMG
class=shape height=17 alt="Select 284"
v:shapes="_x0000_s5405"><SPAN
style="WIDTH: 43px; HEIGHT: 34px">
Price in centre of
graph:
<A
name=RANGE!M2:M3>35.00
<TD class=xl88 style="mso-ignore: colspan" colSpan=2
x:str="' Days to expiry:"><SPAN
style="mso-spacerun: yes"> Days to
expiry:
<A
name=RANGE!P2><SPAN
style="mso-spacerun: yes">
71
Brokerage etc.
(100)
Deal Expiration
6/21/2002
Graph Increment:
1.000
<TD class=xl88 style="mso-ignore: colspan" colSpan=2
x:str="' Analysis Date:"><SPAN
style="mso-spacerun: yes"> Analysis
Date:
4/11/2002
Volatility
<A
name=RANGE!B4>30.00%
Dividend:
<SPAN
style="MARGIN-TOP: 14px; Z-INDEX: 9; MARGIN-LEFT: 0px; WIDTH: 170px; POSITION: absolute; HEIGHT: 25px; mso-ignore: vglayout"><IMG
width=170 v:dpi="96" v:shapes="_x0000_s5211"><SPAN
style="mso-ignore: vglayout2">
<TD class=xl35 style="WIDTH: 61pt; HEIGHT: 12.75pt" width=81
height=17>
Risk free rate
<A
name=RANGE!B5>5.75%
Ex Date:
Price Calculation
Model:
<SPAN
style="MARGIN-TOP: 4px; Z-INDEX: 38; MARGIN-LEFT: 12px; WIDTH: 386px; POSITION: absolute; HEIGHT: 269px; mso-ignore: vglayout">
<IMG class=shape height=23
alt="Vary option parameters"
v:shapes="_x0000_s5376">
<IMG class=shape height=26
alt="Reset days to maximum"
v:shapes="_x0000_s5147">
<SPAN
style="MARGIN-TOP: 0px; Z-INDEX: 20; MARGIN-LEFT: 0px; WIDTH: 74px; POSITION: absolute; HEIGHT: 20px; mso-ignore: vglayout"><IMG
class=shape height=20 alt=" Trade 1"
v:shapes="_x0000_s5294"><SPAN
style="MARGIN-TOP: 21px; Z-INDEX: 21; MARGIN-LEFT: 0px; WIDTH: 74px; POSITION: absolute; HEIGHT: 20px; mso-ignore: vglayout"><IMG
class=shape height=20 alt=" Trade 2"
v:shapes="_x0000_s5295"><SPAN
style="MARGIN-TOP: 43px; Z-INDEX: 22; MARGIN-LEFT: 0px; WIDTH: 74px; POSITION: absolute; HEIGHT: 20px; mso-ignore: vglayout"><IMG
class=shape height=20 alt=" Trade 3"
v:shapes="_x0000_s5296"><SPAN
style="MARGIN-TOP: 64px; Z-INDEX: 23; MARGIN-LEFT: 0px; WIDTH: 74px; POSITION: absolute; HEIGHT: 20px; mso-ignore: vglayout"><IMG
class=shape height=20 alt=" Trade 4"
v:shapes="_x0000_s5297"><SPAN
style="MARGIN-TOP: 86px; Z-INDEX: 24; MARGIN-LEFT: 0px; WIDTH: 74px; POSITION: absolute; HEIGHT: 20px; mso-ignore: vglayout"><IMG
class=shape height=20 alt=" Trade 5"
v:shapes="_x0000_s5308"><SPAN
style="WIDTH: 74px; HEIGHT: 106px">
<IMG class=shape height=26
alt="Reset days to minimum"
v:shapes="_x0000_s5148">
<IMG class=shape height=23
alt="Split/Unsplit Screen"
v:shapes="_x0000_s5302">
<IMG class=shape height=23
alt="Switch to table view"
v:shapes="_x0000_s5375">
<IMG class=shape height=26
alt="Clear current strategy"
v:shapes="_x0000_s5190">
<SPAN
style="MARGIN-TOP: 41px; Z-INDEX: 3; MARGIN-LEFT: 9px; WIDTH: 212px; POSITION: absolute; HEIGHT: 25px; mso-ignore: vglayout"><IMG
width=212 v:dpi="96" v:shapes="_x0000_s5128"><IMG height=89
v:shapes="_x0000_s5336 _x0000_s5132">
<IMG class=shape height=38
width=105 v:dpi="96" v:shapes="_x0000_s5255">
<SPAN
style="mso-ignore: vglayout2">
<TD class=xl35 style="WIDTH: 35pt; HEIGHT: 12.75pt" width=47
height=17>
Calc Implied
Option Trades:
<TD class=xl96 style="BORDER-TOP: medium none; WIDTH: 52pt"
width=69>Action: Buy/Sell
Type
No.
Strike
Implied Volatility
Trade Expiry
<TD class=xl97 style="BORDER-TOP: medium none; WIDTH: 52pt"
width=69>Override Price
Voltlty
Expiry
Days to Expiry
Price used
Calculated Optn Price
Initital Deb/Cred
Delta
Status
Volatility
Option Trade 1
<A
name=RANGE!B8:H12>S
<A
name=RANGE!C8:C12>C
100
<A
name=RANGE!E8:E12>37.00
<TD class=xl85 style="BORDER-TOP: medium none" align=right
x:num="37428">6/21/2002
3.70
30.0%
6/21/2002
127
3.7
<A
name=RANGE!M8:M12>2.0925
370
0.48
Out' money
Option Trade 2
b
p
100
36.00
3/15/2002
1.00
30.0%
3/15/2002
29
1
1.4589
(100)
-0.55
In' money
Option Trade 3
30.0%
6/21/2002
<TD class=xl35 style="COLOR: white; mso-ignore: style" align=right
x:num>9999
Option Trade 4
30.0%
6/21/2002
<TD class=xl35 style="COLOR: white; mso-ignore: style" align=right
x:num>9999
Option Trade 5
30.0%
6/21/2002
<TD class=xl35 style="COLOR: white; mso-ignore: style" align=right
x:num>9999
270
Net:
<SPAN
style="mso-spacerun: yes">
170
Stock Trades:
Action: Buy/Sell
<SPAN
style="mso-spacerun: yes"> No. Shares
<SPAN
style="mso-spacerun: yes"> Price
Stock Trade 1
<A
name=RANGE!B15:D16>B
100
35.35
<SPAN
style="MARGIN-TOP: 3px; Z-INDEX: 28; MARGIN-LEFT: 2px; WIDTH: 250px; POSITION: absolute; HEIGHT: 77px; mso-ignore: vglayout"><SPAN
style="MARGIN-TOP: 12px; Z-INDEX: 30; MARGIN-LEFT: 10px; WIDTH: 134px; POSITION: absolute; HEIGHT: 31px; mso-ignore: vglayout"><IMG
class=shape height=31 alt="Absolute Price"
v:shapes="_x0000_s5264"><SPAN
style="MARGIN-TOP: 0px; Z-INDEX: 31; MARGIN-LEFT: 9px; WIDTH: 232px; POSITION: absolute; HEIGHT: 73px; mso-ignore: vglayout"><IMG
class=shape height=73 alt="Show stock price as "
v:shapes="_x0000_s5265"><SPAN
style="MARGIN-TOP: 42px; Z-INDEX: 32; MARGIN-LEFT: 10px; WIDTH: 212px; POSITION: absolute; HEIGHT: 24px; mso-ignore: vglayout"><IMG
class=shape height=24 alt="Percent Change from current price"
v:shapes="_x0000_s5266"><SPAN
style="MARGIN-TOP: 12px; Z-INDEX: 34; MARGIN-LEFT: 10px; WIDTH: 134px; POSITION: absolute; HEIGHT: 31px; mso-ignore: vglayout"><IMG
class=shape height=31 alt="Absolute Price"
v:shapes="_x0000_s5351"><SPAN
style="MARGIN-TOP: 0px; Z-INDEX: 35; MARGIN-LEFT: 9px; WIDTH: 232px; POSITION: absolute; HEIGHT: 73px; mso-ignore: vglayout"><IMG
class=shape height=73 alt="Show stock price as "
v:shapes="_x0000_s5352"><SPAN
style="MARGIN-TOP: 42px; Z-INDEX: 36; MARGIN-LEFT: 10px; WIDTH: 212px; POSITION: absolute; HEIGHT: 24px; mso-ignore: vglayout"><IMG
class=shape height=24 alt="Percent Change from current price"
v:shapes="_x0000_s5353"><IMG height=77
v:shapes="_x0000_s5208 _x0000_s5320 _x0000_s5350"><SPAN
style="mso-ignore: vglayout2">
<TD class=xl65 style="WIDTH: 54pt; HEIGHT: 12.75pt" align=right
width=72 height=17 x:num>35.35
100
<TD class=xl78 style="BORDER-TOP: medium none" align=right
x:num="-3535">(3,535)
Stock Trade 2
35.35
<SPAN
style="MARGIN-TOP: 15px; Z-INDEX: 27; MARGIN-LEFT: 108px; WIDTH: 220px; POSITION: absolute; HEIGHT: 29px; mso-ignore: vglayout"><IMG
class=shape height=29 alt="Include funding cost/revenue in P&L"
v:shapes="_x0000_s5332">
<TD class=xl45 style="WIDTH: 84pt; HEIGHT: 12.75pt" width=112
height=17>
35.35
<TD class=xl66 style="BORDER-RIGHT: blue 1pt solid; mso-ignore: colspan"
align=middle colSpan=2>Days to Expiry
100
(3,535)
<TD class=xl40 style="BORDER-RIGHT: blue 1pt solid; mso-ignore: colspan"
align=middle colSpan=2 x:num>71
<SPAN
style="MARGIN-TOP: 4px; MARGIN-LEFT: 8px; WIDTH: 998px; POSITION: absolute; HEIGHT: 367px; mso-ignore: vglayout"><IMG
width=998 v:dpi="96" v:shapes="_x0000_s5121"><SPAN
style="mso-ignore: vglayout2">
<TD class=xl35 style="WIDTH: 84pt; HEIGHT: 13.5pt" width=112
height=18>
<TD class=xl35
style="WIDTH: 174pt; HEIGHT: 39pt; mso-ignore: colspan-rowspan" width=232
colSpan=3 height=52 rowSpan=3>
<IMG class=shape height=46 alt="Save Scenario"
v:shapes="_x0000_s5270">
<TD class=xl35
style="WIDTH: 174pt; HEIGHT: 51pt; mso-ignore: colspan-rowspan" width=232
colSpan=3 height=68 rowSpan=4>
<IMG class=shape height=46 alt="Replace Current Scenario"
v:shapes="_x0000_s5274">
<TD class=xl35
style="WIDTH: 174pt; HEIGHT: 76.5pt; mso-ignore: colspan-rowspan" width=232
colSpan=3 height=102 rowSpan=6>
<SPAN
style="MARGIN-TOP: 41px; Z-INDEX: 14; MARGIN-LEFT: 7px; WIDTH: 157px; POSITION: absolute; HEIGHT: 24px; mso-ignore: vglayout"><IMG
width=157 v:dpi="96" v:shapes="_x0000_s5273"><IMG height=88
v:shapes="_x0000_s5271 _x0000_s5272">
<TD class=xl35
style="WIDTH: 174pt; HEIGHT: 39.75pt; mso-ignore: colspan-rowspan" width=232
colSpan=3 height=53 rowSpan=3>
<IMG class=shape height=45
alt="Copy Strategy to Comparison Area"
v:shapes="_x0000_s5275">
<SPAN
style="MARGIN-TOP: 8px; Z-INDEX: 17; MARGIN-LEFT: 14px; WIDTH: 169px; POSITION: absolute; HEIGHT: 46px; mso-ignore: vglayout"><IMG
class=shape height=46 alt="Switch to Comparison Area"
v:shapes="_x0000_s5277">
<TD class=xl35 style="WIDTH: 48pt; HEIGHT: 12.75pt" width=64
height=17>
<TD class=xl57 style="HEIGHT: 12.75pt; mso-ignore: colspan" colSpan=6
height=17>Options Strategy Evaluation Model Copyright © 2000 Peter
Hoadley
<A
href="http://www.hoadley.net/options";>http://www.hoadley.net/options
Version 25 October
01
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