Jims Bull Call Spread/Bear Put Spread journal

Discussion in 'Journals' started by JJacksET4, Oct 31, 2011.

  1. I have done several trades where I purchase the Bull Call Spread and Bear Put Spread on the same stock for the same expiration at the same time. It is similar to a straddle or strangle, but without unlimited gains - however, it can be rare for super large gains to be racked up anyway, so the idea here is to make good gains and have closer break-even at expiration points.

    That is the theory at least. In general, I am going to try to trades where the current HV is higher then the IV, and a Monte Carlo Simulation shows a good percent chance of the stock hitting a price on either side that would generate about a 50% profit. For now, I plan to do the trades for about 1 1/2-2 months so for now for example I am using Dec expiration.

    I usually like to go closer to the bear put spread for several reasons. Also, these are generally done after a company has reported earnings.

    Here are 3 trades I started with today.
    GS - Buy 120/130 Bull Call Spread
    GS - Buy 110/100 Bear Put Spread
    Cost = $510

    CAT- Buy 100/110 Bull Call Spread
    CAT - Buy 92.5/82.5 Bear Put Spread
    Cost = $475

    OXY- Buy 100/110 Bull Call Spread
    OXY - Buy 92.5/82.5 Bear Put Spread
    Cost = $477

    CAT and OXY just happened to use the exact strikes.

    The profit goal is 50%. I will attempt to close within about 1 month or before a 50% loss.

    I have attached a picture of the page on ivolatility.com for GS showing the current HV as being much greater then the current IV.

    In the next post after this one, I will attach a picture showing the Monte Carlo Simulator results for GS.

    Note that I am showing GS as an example of what I am trying to find, but will not bother showing so much detail for each trade.

    JJacksET4
     
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  2. Here is the Monte Carlo Simulation picture just to show an example of the numbers I am looking for.

    JJacksET4
     
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  3. Closed the GS trade for 6.56 total. Other trades still open.
     
  4. Forgot to report that on Tuesday, I closed the CAT trade for 4.72 (a .03 loss). OXY position still open.