The following is from one of my regular readers, Kadena. Kadena is in the US military overseas and trades after he’s off duty, during his nights. If you want to share your trade stories with everyone, you can email me with what you traded and why. My email address is thetrader[AT]mytradersjournal[DOT]com.
Today I opened 5 different kinds of bull plays on AIG.
The first is simply bought stock in my E*Trade account for the long term, so no expiration here to worry about. Very timid, 20 shares at 65.85. The other 4 plays are option moves in TOS broker.
1. Single call buy Jan08 60 strike for $970.
2. Single call vertical contract buy Jan08 55/60. Paid 13.60 for the 55 side/received 9.20 for the 60 side (hedge) total paid $440
The total risk in these 2 purchases is $1,410. Profit potential of mere $60 for vertical at expiration or can trade the vertical for profit if situation arises. And the call can be sold for unlimited profit if AIG moves up.
3. Single put naked sell Jan 08 50 strike for 1.10. credit if AIG remains above 50, $110. potential to trade ahead of time
4. Single put vertical sold Jan 08 60/55. Received 2.85 for 60 side/paid 2.00 for 55 side(hedge) total received $85
I wanted to work off of 60 strikes for Jan, except for the naked put went all the way down to 50 strike.
Best scenario credits of 110 and 85 for bull put positions, bull call positions set up for 60 on vertical , and unknown for the call, so 245 plus
Loss scenario, well let’s just monitor the stock, AIG
I picked AIG because it came up in my Aug p&f list I built, and being alphabetically at the top was the first i spent the most time looking at the chart. Certainly, the stock could revert down and all the bull options will suffer, but I agree with the p&f long term in a price rise. So I am trying to balance long and short term ideas.
Actually, something very strange last night in looking at price charts was that most of the stocks which had the + in my p&f appeared to be ready for price dips, while the ones with – price targets appeared to be ready for price jumps. Not sure why, but know it is important.
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