Market Curiosity: Exploring Markets And Systems

May 27, 2011

Long EZPW using a combination of options. Total cost about $10. (update 2, June 1) +14% basis margin

Filed under: +06 to +25%, Long Calls, Short Puts — Tags: — Jeff Fitzmyers @ 11:30 am

This is an experiment. Interactive brokers made setting up the option combination easy. Essentially this makes a “free”call until expiration in June. If price has not moved up much, another short term put can be purchased. Margin is around $800 per option combination.
Long JUL 30 call at 2.11. And to pay for it:
Short DEC 30 put at 2.68. And to have near term down side protection:
Long JUN 30 put at 0.47.

I don’t intend on holding this option combination past June. If EZPW just trades near 33, time to look at exiting.

+ IBD Top 50 stock.
+ Price just seems to be in a consolidation.
+ EMA’s are all trending up.

A good reason to be protected when selling puts on momo stocks. This bar started at about $20 and dipped to about $10.

June 1: close positions due to general market weakness. Long the July 30 call +51%, Short Dec 30 put +17%, the June 30 put will likely expire -100%. +19% overall basis margin. I think I would do an option combo like this again.

June 1.1: Opps, June 30 put – 87%. Overall is about +14% basis margin.

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