Stock / Symbol: Verifone Systems / PAY
Option Strategy: bull put spread
Trade entry date: May 31
Price at trade entry: $35.48
Date / Price at 1st adjustment: Jun 12 / $31.30
Price at this post: $37.28
Current Position:
Short -4 PAY Oct12 25 puts
Long 4 PAY Oct12 22 puts
at an effective credit of $0.04 per contract
Reasoning: When our stop was triggered back on June 12th, we were down about 25% on the trade. We adjusted the trade then by rolling our Jul12 31/28 put spread into a Oct12 25/22 put spread. As long as PAY stays over $25 by Oct expiration, the trade will end up with a small gain. However, if we can get out of the trade early for small loss, we'd like to. With PAY dropping 12% on us between trade entry and trade adjustment, we had considered this a salvage trade, and can be happy with turning a 25% loss into just a 2% loss.
If you'd like to go for the small win on this one, you're pretty safe to go for it by just allowing the position to expire worthless. At a -0.05 Delta (-.20 Delta on entry), the short 25 puts have just a 9% chance of expiring in the money by Oct expiration.
The mid of the spread is currently at $0.10, our desired closing price. However, it way still take a few more weeks to get filled.[/private_monthly]
Closing Details:
BTC -4 PAY Oct12 25 puts
STC 4 PAY Oct12 22 puts
for a max net debit of $0.10 per contract. (GTC, limit order)
Max Risk: $1,184
Max Reward: $35 or 3% over $25 by Oct12 exp
Profit Range: over $25 by Oct12 exp
Suggested Downside stop: @ $26
Profit / Loss upon fill: ($24) pre-commission
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