Stock / Symbol: Proshares Ultra Natural Gas / BOIL
Option Strategy: put ratio spread
Price at trade post: $33.30
Reasoning: Looking to take advantage of today's big drop in BOIL, a play on natural gas. Because BOIL is extremely volatile, the options premiums are huge with this ETF. IMPORTANT: if you participate in this trade, [private_monthly]you must be willing and able to purchase 100 shares of BOIL at $30 per share in the event that the 30 strike put we're selling gets exercised.[/private_monthly] This is a neutral trade with an upside bias. The current greeks are: delta of 22.6, positive theta of 2.8 and a vega of -3.3. This trade's probability of success is currently at 65% by Feb expiration.[private_monthly] If BOIL finishes at or over $31 by Feb expiration, we'll make 3% on the trade but the trade max return is 6.5% at $30 by Feb expiration, with a breakeven at $28.[/private_monthly] If you'd like to dramatically increase the return on this trade, you could also [private_monthly]add a covered call by selling 1 Feb13 38 call for every 100 shares you purchase. Of course, purchasing 100 shares doubles your risk on the trade. [/private_monthly]
Trade Details:
[private_monthly]
BTO 1 BOIL Feb13 31 put
STO -2 BOIL Feb13 30 puts
for a min net credit of $0.90 per contract (day order, limit order). The mid is currently at $0.95, so try for the mid less $0.05. If not filled today, ok to try again tomorrow.
Requirements:
Cost/Proceeds ($90)
Option Requirement $3000
Total Requirements $2910
Estimated Commission $5
[/private_monthly]
Max Risk: $2910
Max Reward: $185 or 6.3% by Feb 15[private_monthly] at $30
Profit range: at/over $28.10 by Feb 15
Suggested Downside Stop: $30.15
[/private_monthly]
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