With TLT at 123.37 http://stockcharts.com/h-sc/ui?s=tlt Jun 105/100 bull put spread for a net credit of $52 Yield = 52/448 = 11.6% in 255 days or 16.6% annualized Prob = 90% Expectation = .9(52) - .05(448) - .05(224) = 46.8 - 22.4 - 11.2 = 13.2 Price............ Profit / Loss............. ROM % 75.00 ...............(448.00)................ -89.60% 90.20 ...............(448.00)................ -89.60% 100.00 .............(448.00)................ -89.60% 104.48 ..................0.00.................... 0.00% 105.00 .................52.00.................. 11.60% 106.21 .................52.00.................. 11.60% 122.21 .................52.00.................. 11.60% 138.22 .................52.00.................. 11.60% 154.23 .................52.00.................. 11.60%
and... Any plans for risk management or... ? As you stated with nothing more, I'm finding it hard to see how this trade is any better than flipping a coin...
For insights into how OP manages these trades, check the first few pages of the "conservative option trades" thread. Based on Probability 101 calculations, clearly the probability is way more than 50% (a coin toss).
What he posted means nothing and is no better than coin flipping. I guess what you're saying is the OP is just starting a random new thread with a random trade and no explanation for any of it in hopes that people go back and read his post history in other threads and piece it together? Seems odd, but to each his own right. I'm finding it impossible to determine what the point of this thread is. Just randomly posting a TLT vertical? Are you expecting follow up? Are you expecting a discussion? You want people to track this particular trades progress? What exactly are you looking for here?
" What exactly are you looking for here?" Actually I am not looking for anything here. This trade is actually a statement that I don't expect the FED to raise rates substantially before June. I base this on the failure of the fed to raise rates in it's September meeting (despite Yellen's talking up a rate hike before hand ) and, more importantly, on the fact that Ben Bernanke is making a speaking tour promoting his book during which he is talking down the wisdom of raising rates at this time. Bernanke has taken on the aura of an economic guru and it will be hard for Yellen and the FOMC to raise rates without his blessing. Actually the trade would allow for a very mild rise in rates which would drop TLT a little but going down to 105 is very unlikely. (actually the price distribution data places this probability at <10%... as good a guess as any). I apologize if this post seems sparse and I usually accompany my posts with more robust references, but in this case I would have had to post a whole bunch of references including a textbook on macro-economics. Minutes from the Sept FOMC meeting are due out today and, in fact, these may move TLT but I seriously doubt it. If you find this post opaque just ignore it.
The Sept FOMC minutes via CNBC http://www.cnbc.com/2015/10/08/fed-minutes-members-worried-about-slower-global-growth.html http://www.cnbc.com/2015/10/07/ben-bernanke-fed-might-want-to-heed-market-view-on-rates-dj.html http://stockcharts.com/h-sc/ui?s=tlt http://www.cnbc.com/2015/10/05/human-to-walk-on-mars-before-long-term-rates-rise.html
So the spread on TLT we wrote in Oct is about to expire and 255 days later we have made our money on it pretty much without incident. To me this trade is the prototype of what I want to achieve by my trades. I target 15% annualized with a prob of 90%. This is it. Now I would like to roll this trade over BUT: http://stockcharts.com/h-sc/ui?s=tlt TLT has been running up and the 105/100 bull call spread which yielded 11.6% in October now only yields 2% . It's not worth the commissions unless I do a whole boodle of it... or move the trade up. We're pretty close to a 5 year high on TLT: http://finance.yahoo.com/echarts?s=TLT+Interactive#{"range":"5y","allowChartStacking":true} I have had a few of these recently and the elevated market on bonds and stocks http://finance.yahoo.com/echarts?s=SPY#{"range":"5y","allowChartStacking":true} is going to put me out of business unless we have a pull back soon. I need a pull back in the market or a re-pricing of options. Maybe it IS time to go away for the summer and see how things are in Sept. Our pool opened a couple weeks ago.