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Hi all,
please find attached the charts of Ben's actual position according to his
account statements (blue), and the equivalent calendar spread (red). Again,
his position is equivalent to a time spread, and has no unlimited risk, as
before.
At first glance the position looks even better than the one we discussed
before. An option trader's dream come true, the charts seem to show a
totally riskless position. Once this position is on, we cannot lose. We can
only wait to see how big we win. Is this the free lunch on Wall Street at
last?
Well, things are not always what they seem. Here is what happened.
Ben did not escape risk, because he didn't enter his position all at once.
Since Feb. 7, Ben had been long QQQ stock, thereby accepting the overnight
risk of that position for a whole week. Then, on Feb. 14, he added his
diagonal spread to lock in current profits and to keep the chance for some
more (albeit limited) gains intact.
It's a legitimate play, though perhaps more complicated than necessary.
Frankly, it is not the option strategy that impresses me here, but Ben's
timing of the move. To go long QQQs on Feb.7 was a courageous act for sure,
and to see the impending downturn of the market on Feb. 14 shows excellent
timing again.
Well done, Ben!
Michael Suesserott
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Attachment:
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