AMZN Credit Spread

Discussion in 'Options' started by viruscore1, Sep 3, 2017.

  1. I place AMZN Vertical Credit spread last week Oct 24 and filled at my limit price 1.88cr. This is outside my realm, but a friend only trades far OTM credit spreads and always close before expiry. Would anyone in this space close early or wait until option expiry? It's currently profitable, approximately 55% of max prem $940 realized in 7 days and 100 days to go. Here's the trade...
    20170903CrAMZN.jpg

    Here's my close.
    20170903CrAMZNClose.jpg
     
    Last edited: Sep 3, 2017
  2. Handle123

    Handle123

    Do you have a trading plan on trading options? I am guessing you don't since you are asking such a question. Since you put on trade from your friend? Perhaps he should teach you the rest? Hmmm last week wasn't October....

    Charts show me possible Head & Shoulders setting up on uptrend weekly and daily trend is down.
     
  3. Ok approximately 7 business ago I placed a trade based on friends strategy, should i change it to 2 weeks go? I ment Aug, did that really confuse you, sorry. The date acquired is in the pic.
    I do have a option trading plan but that is not part of this discussion, as you can see. I do not use bogus graphs, I find them a waste of time. Price action and fundamentals keeps me profitable. But you can use them tho, use whatever works best for you. Please don't let me stop you.
    I clarified my discussion, can you answer the question?
     
    Last edited: Sep 3, 2017
  4. Handle123

    Handle123

    Hey, you have to use what you believe in and no one would have me change my Trading Plans. So I do believe price action is charting but you don't believe in them, seems a contradiction. Regardless, 55% in seven days, so another 100 days to make 45%, seems like a gift to me in short time. But what do I know, just been using bogus charts for 39 years, my graphs and pencil going to Starbucks.

    Nice trade by the way.
     
    ironchef, beginner66 and viruscore1 like this.
  5. What I don't like about this trade is the risk of 10k to make $940. I guess there is risk in everything we do here. The good, only 5k margin is required. Many may laugh but my consistent annual return is approximately 35% or 3% per month. This fit's in ok...
     
  6. Take the profit now. If you still have the same bias, then adjust your strikes and put on a new spread.
     
    viruscore1 likes this.
  7. ironchef

    ironchef

    Impressive returns!:thumbsup:

    I noticed these are fairly long expiry options and so the risks of things go against you seemed high. 55% in 7 days, I would get out.
     
    viruscore1 likes this.
  8. grendel54

    grendel54

    If I hit 15% first day I pull it off
    If I hit 50% within a small time period such as this I pull it off.

    Close it and move on to the next trade.
     
  9. Here's another reason not to wait till expiry:

    [​IMG]

    OTM options will have a swift drop and then the curve bends back. You got lucky that the drop occurred real fast in your trade but you are basically standing at the midpoint and the theta decay will be slower and slower. In the mean time you remain open to market risk. My rule of thumb is to close such long term credit trades when I get to 2/3 of the theoretical profit. (Yes I have sinned many times against this rule! Dont do as I do, do as I say.)
     
  10. Based on your analysis, AMZN has a high probability drop below $780 by Dec 15 which is about 100 days from today. The last time AMZN was at 780 was 1st week in Jan 2017. I do see your point in taking profits quickly and roll into following months. We came to similar conclusion, i will mostly likely follow your advise. The high premium was only achieved by a dip in Amazon stock price, being an ecommerce leader the bounce was imminent. That's why the close is in place. However the rise may continue for Amazon to the end of the year and beyond due to heavy shopping season. Thanks for the chart, the 45 day seems like a sweet spot, another 55 days to go...:cool:
    Drop780.jpg
     
    #10     Sep 4, 2017