Re: [RT] spread on ibm

["Dom" <domenick@xxxxxxxxxxxx>]

Hello Mike,
     
     I do this as a collar 
spread. I sell the put and the call. Net credit of 9.00. The profit range for 
ibm would be between 96.00 to 114.00. I place stops at 96.00 and 
114.00. 
    I presented a most conservative 
approach. With this conservative approach the profit range would be 101 and 109. 
These figures would be 105.00 strike  plus/minus the 4.00 credit=101.00 and 
109.00. How did you get 102 and 108?  
 
Best regards, 
Dom
 
    
    
<BLOCKQUOTE 
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
  ----- Original Message ----- 
  <DIV 
  style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
  <A title=MikeSuesserott@xxxxxxxxxxx 
  href="mailto:MikeSuesserott@xxxxxxxxxxx";>MikeSuesserott@xxxxxxxxxxx 
  To: <A title=realtraders@xxxxxxxxxxxxxxx 
  href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
  
  Sent: Thursday, March 14, 2002 2:37 
  PM
  Subject: [RT] spread on ibm
  
  Hi 
  Dom,
  <SPAN 
  class=541315818-14032002> 
  <SPAN 
  class=541315818-14032002>no offense, I hope, but the trade you suggest here is 
  not very promising, IMHO. The risk/reward of 1 to 4 sounds good; however, 
  this is not the correct number by which to evaluate this spread, for the 
  simple reason that the attainment of that profit is very 
  unlikely. Probability calculations 
  bear this out. To wit:
  <SPAN 
  class=541315818-14032002> 
  <SPAN 
  class=541315818-14032002>The range of profitability of this spread is 
  extremely limited - only between, roughly, 102 and 108, which is a very 
  small range for IBM to be in at expiration. If you exit the spread earlier, 
  that range will be even smaller. In consequence, p<SPAN 
  class=541315818-14032002>robability of profit is only 13%, and 
  the mathematical expectation of the trade is negative, -0.72 points. 
  Should volatility increase, those numbers will be even 
  worse.
  <SPAN 
  class=541315818-14032002> 
  <FONT face="Trebuchet MS" 
  color=#000080>Why do a trade for which the probabilities are so 
  unfavorable right from the outset?
  <SPAN 
  class=541315818-14032002> 
  <FONT face="Trebuchet MS" 
  color=#000080>Regards,
  <SPAN 
  class=541315818-14032002> 
  <FONT face="Trebuchet MS" 
  color=#000080>Michael Suesserott
  <SPAN 
  class=541315818-14032002> 
  <SPAN 
  class=541315818-14032002> 
  <SPAN 
  class=541315818-14032002> -----Ursprüngliche 
  Nachricht-----Von: Dom 
  [mailto:domenick@xxxxxxxxxxxx]Gesendet: Thursday, March 14, 2002 
  17:27An: realtraders@xxxxxxxxxxxxxxxBetreff: [RT] Re: 
  spread on ibm
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    <BLOCKQUOTE dir=ltr 
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      ----- Original Message ----- 
      <DIV 
      style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
      Dom 
      
      To: <A 
      title=realtraders@xxxxxxxxxxxxxxx 
      href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
      
      Sent: Thursday, March 14, 2002 11:24 
      AM
      Subject: spread on ibm
      
      Here is spread that can be done now with good 
      risk/reward   .
      sell ibm 105 april put and sell 105 april 
      call. buy the april 100 put and buy the april 110 call. total 
      credit +4
      Max. loss -1 max gain +4 <FONT 
      face=Arial size=2>or anywhere in between.
       
      If comfortable using stops pocket total 
      premium of +9., place stops at 100 and 110. For myself I would use 
      choice.
      DomTo 
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