Trade Adjustment : MCD

trade adjustmentStock / Symbol: McDonalds / MCD

Option Strategy: [private_monthly]calendar spread[/private_monthly]
Price at trade post: $87.60
Price at this adjustment: $92.20

Current Position:
Long 3 MCD Jan13 87.5 calls
Short -3 MCD Aug12 87.5 calls
at a debit of $2.15 per contract

Reasoning: Our upside stop was triggered. Going to buy a protective call which will keep the loss on the trade just about where it is now should MCD continue higher & still give us an opportunity to make money on the trade if/when MCD settles back down. [/private_monthly]

Trade Details:
BTO 1 MCD Jan13 92.5 call
for a max debit of $3.85 per contract (current bid @ 3.75 / ask @ 3.80; use day order, limit order)

Max Risk: $1,020 (adjusted up from $645)
Max Reward: $280 or 27% by Aug 17
Profit Range: $85.70 to $90.25 by Aug 17
Max Profit at: $87.5
Suggested upside stop: NA
Suggested downside stop: $83.90

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  1. Thomas Tampi says:

    Hi there;

    What is the point of having an upside and downside stop which I presumes we have to place them once we get filled. Am I wrong to assume that the stop order is only for information and not supposed to be placed as contingent orders? Appreciate any clarification.

    Thank you

  2. Thomas, our stop levels are points where we’ll either exit or adjust the trade. Without a crystal ball, it’s hard to know whether it’s better to just exit the trade or adjust it when a stop is hit. We leave it up to you to decide what to do with the stop information. You can either set contingent stops, or set a mental stop and make a decision at that time, or wait for us to say to either close or adjust.

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