Would you trade this time spread?

Discussion in 'Options' started by tradingjournals, Aug 31, 2010.

  1. In AH QQQQs, sept03- strike 44 call and sept18- strike 45 calls were trading at 0.32, and 0.33. A spread would cost 0.01 time premium/one dollar per contract. Expiration of the sept03 calls is this friday.

    Could you discuss the risks of this trade? The worst case I see is if on this friday, QQQQ goes to 45, and the sept18 implied volty becomes zero (zero volty is not realistic).

    Would you have taken this trade?
  2. The PNL is roughly symmetrical at the short and long strike; +/- $30 per contract at expiration on flat vol. Your vegas are reduced by gamma due to the split strike. It looks ok for a touch of 44.00, but you start to lose at 44.50.
  3. JamesJ


    scenario graph...

    not too bad, if transaction cost is very low