RR, The credit on that trade was $192.00, with a possible Max Loss of $305.00 (though I would close out long before it got that bad). So there's a Possible Net Gain of 62.95% over 6 months, with a Max 1.59 Risk/Reward ratio. As to TA, one could argue the last higher low was 300.00, and it hasn't undercut that level yet. But I also look at it more broadly in terms of the 3 year move, seeing all that support in the last half of 2011. I certainly wouldn't buy the stock here expecting it to make new highs anytime soon. But going sideways and healing for a while around 300 seems more likely to me than collapsing much further. The point has been made, so now there should be some short covering, plus bargain hunters buying or re-buying at cheaper prices after the pullback/correction. We'll see soon enough. CMG is still making plenty of money, just not as much growth to come near term as previously predicted. It's certainly not dying, so the stock could start heading north again after a while, just at a slower clip. The next couple of Earnings Reports should clear up the picture a bit. I like selling Put Spreads after pullbacks/corrections in uptrends to get better credits. Setting the Strikes below the new support level and then seeing if it holds. Of course when I'm wrong, I have to eat the loss! As you know, the beauty of a Credit Spread is the stock doesn't have to go up for one to make nice % gains. Just staying at or anywhere above that line will do.
I didn't see the JAN at first glance...wow.... you must really be a longer term bull! IMO right now anything longer term holds a lot of risk. anywhoo GL on your trade.
RR, Thanks for the GL. I know conventional wisdom says to hold Credit Spreads only a month or two. But I've found there are pros and cons to short term vs. long term Credit Spreads. A one month Spread gets you out before a pullback/correction in month 2, but you get a much smaller credit and take on a much higher risk/reward ratio. Also, if there's a pullback right after you open (like in May this year!) there's no time for the stock to repair itself and you take a large loss. Whereas a six month Spread gives the stock time to recover after an early pullback/correction, you get a larger credit, and there's a much lower risk/reward ratio. You can also exit early if you get way ahead and keep most of the original credit. But, you can get in trouble if there's a correction in month 5 or 6. I trade both short term and long term Spreads, depending.
BTW this was an excellent article and he presents a strong case for the Bears for the rest of 2012! We'll see what happens. http://seekingalpha.com/article/738...ll?source=yahoo
I went ahead and took the trade...probably should have been a bit more patient. cost. was .55 for the diag and 1.05 for the sept vertical...so a bit higher than I had hoped for.
GL with those trades. The 300 line is the thing I guess. It's held so far - for 2 whole days! Will be fun to see what happens.
i honestly can't believe i missed this pretty girl stock dropping over a hundred bucks.. i swore i was going to ratio backspread all the pretty girl stocks! freaking A!
like knife thru butter:eek: However Aug exp is a long way off. I have to assume there will be an uptick sometime. I'd like to extend my Sept put spread to a 10 pt from a 5 point but waiting for some kind of bounce upward to do so.