METRICS:
Max Loss/Buying Power Effect on Setup: $112
Max Profit on Setup: $88
Break Even Versus Spot: 6.12 versus 6.50
Debit Paid to Spread Width Ratio: 56%
Notes: I'm fairly dubious that I'll get filled at the mid price on this, since that debit paid/spread width ratio is unusual to say the least. Moreover, the setup is bid 1.00/mid 1.12/ask 1.25, and I'm looking for a mid price fill. The other natural option is to just sell the 6 short put out in May, which is paying 1.00 at the mid price with a cost basis of $5/share if assigned; it also has a comparable buying power effect on margin versus the upward call diagonal. If cash secured, however, you'll tie up full notional, so the diagonal would offer you buying power relief in that environment with the option to exercise the 5 later after you've reduced cost basis for any remaining cycles in the setup (i.e., June, July, August).
Max Loss/Buying Power Effect on Setup: $112
Max Profit on Setup: $88
Break Even Versus Spot: 6.12 versus 6.50
Debit Paid to Spread Width Ratio: 56%
Notes: I'm fairly dubious that I'll get filled at the mid price on this, since that debit paid/spread width ratio is unusual to say the least. Moreover, the setup is bid 1.00/mid 1.12/ask 1.25, and I'm looking for a mid price fill. The other natural option is to just sell the 6 short put out in May, which is paying 1.00 at the mid price with a cost basis of $5/share if assigned; it also has a comparable buying power effect on margin versus the upward call diagonal. If cash secured, however, you'll tie up full notional, so the diagonal would offer you buying power relief in that environment with the option to exercise the 5 later after you've reduced cost basis for any remaining cycles in the setup (i.e., June, July, August).
Trade active:
Well, I don't believe it, but I got filled for 1.14/contract.
Trade closed: target reached:
Out for a 1.57/contract credit (50% max); .43 ($43) profit/contract; 37.7% ROC.