You stated November 04 in your previous post. No way did you buy the BABA Nov28 103.00 calls at $2.28 on November 03 .
Sorry, I stand corrected. i entered the trade on nov 3 after close. The trade executed on nov 4 at approximately 9:30.
Example for successful trade I made: Wrote on mondey, 10/27, The underlying: SPDR S&P 500 - SPY, Trade price: 195.71 Expires 10/31 oct Buy Long leg= Call 186 for 10.03 Sell Short leg = Call 190 for 6.15 Bought this spr opt for 3.88 debit, with real value of 4 at expiration. Market closed on friday, 10/31, at 201.66. The both them expired already. I got to earn: 3.88/4 = 3.1% weekly. This is how i used to calculate my profits, with big consideration of IV. (sets the depth of ITM legs, the higher IV the deeper my spread) Any opinion sharing is welcome
Delta can give you a rough idea of probability. For a more quantitative answer, use this formula (assuming a normal return distribution with no skew or kurtosis) X = exp(sigma*t*x)*S where X = future spot sigma = percent volatility t = sqrt(days 'til expiry/365) x = standard deviations S = current spot To find a given probability of your choosing, in Excel, use =normsdist(<your standard deviations here>). =normsdist(1.282) = 0.9 =normsdist(-1.282) = 0.1 The normsdist function calculates the area under the bell curve to the left of a given standard deviation value. Also, you can use 252 trading days instead of 365 calendar days if you prefer. The only "unknown" here is volatility, which is why volatility analysis is such a huge area of research.
Buying an ITM debit spread will be a losing position from entry to exit, no exceptions. Real-time quotes as of 3:28 PM EST
I dont understand why, my friend, I just Bought spr at 3.88 debit. After 5 days the spreads expire so i get 4 credit, 3.88\4 = 3.1% I dont mind what happends to the spread value during this 5 days as long as its not threatening getting into my short leg strike.
If you are letting an ITM spread go to expiration don't you have exercise fees for each leg? Mine would be 15$ per leg which would wipe out profits for 2 of those spreads. I dunno...I always settle ITM positions before expiration. My options fee is 1.50 per lot so I would have to have on 11 spreads before it would be cheaper to let them expire.