- This topic has 5 replies, 1 voice, and was last updated 7 years, 8 months ago by .
Viewing 6 posts - 1 through 6 (of 6 total)
Viewing 6 posts - 1 through 6 (of 6 total)
- You must be logged in to reply to this topic.
Become a Great Options Trader
Home › Forums › Swing Trades › Knife Catch in DIS
Absolutely brutal move in the stock post earnings. We’ve seen enough movement over the past two days to justify putting on bull put spreads.
Here’s the trade
Scale in to thirds
Sell to open DIS Sep 100/95 Bull Put Spread for .70 (This was going for .80 just a second ago)
ADD to the trade at 1.00
ADD to the trade at 1.50
Going to buy the trade back for .25 here.
Here’s the thing– trying to get that extra 25 bucks out of the spread will take nearly 2 months to do as the premium on these spreads can be very stubborn. I’d rather free up the capital and look for a re-entry on DIS if we dip back to the 105 level.
Return on Risk: 11.7% (Assuming fill at .75 not .70)
We’re seeing another lower low get knocked out, so I’m ready to re-enter.
Do you see why it’s so important to scale in and out? We now have opportunity to reenter instead of being stuck at the same trade, seeing profits go to a loss.
Here’s the new trade:
Sell to Open DIS Oct 95/90 BUll Put Spread @0.70
Add to trade at 1.00 and 1.50
ADDING
Sell to open DIS Oct 95/90 Bull Put Spread @1.05
Will close this round out at 0.60
ALL OUT
i’m out both rounds of put spread sales to free up cash.
Buy to close DIS Oct 95/90 Bull Put Spread @0.55 or lower.
Here’s more of an explanation on why it makes sense to close here.
Overall market is soft. Yes we’ve gapped up but there isn’t “stickiness” in individual stocks, meaning the bids aren’t holding very well and these current prices aren’t staying up. We could eventually see another leg up higher in the afternoon but so far we’re not seeing that.
DIS is right at a big level:
Given the way the market’s trading, it’s going to be easier for DIS to retrace back to 100 than it is to hold above 105.
A lot can happen in a month. These spreads are in October, which still has 30 days left to expiration. Odds are we’ll be able to enter into the same spreads with the same or better fills than what we have right now.