Stock / Symbol: SPDR DOW Jones Industrial Avg ETF / DIA
Option Strategy: [private_monthly]diagonal put spread[/private_monthly]
Price at trade post: $147.90
Reasoning: Playing a further pullback in the market / increase in volatility. This diagonal spread also incorporates the characteristics of a ratio spread as it's long more options than it is short. The Greeks on this trade are: delta of -77, a positive theta of 11 and a positive vega of 57. Using weeklies, so if our target of $146.5 on DIA is not hit this week, we'll sell puts again next week.
Trade Details:[private_monthly]
BTO 2 DIA Oct13 147 puts
STO -2 DIA AugWk5 147 puts
for a max net debit of $2.50 per contract (day order, limit order)
then,
BTO 1 DIA Oct13 147 put
at the market
Requirements:
Cost/Proceeds $790
Option Requirement $0
Total Requirements $520
Estimated Commission $7.50
[/private_monthly]
Max Risk: $790
Max Reward: unlimited (at current volatility level) at/under $146.50 or by Aug 30
Profit Range: 0 - $148.25 by Aug 30
Suggested Upside stop: [private_monthly]@ $149.50
Suggested Downside stop: @ $146.50
[/private_monthly]
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