Tuesday, July 10, 2012

Mako at Long Term Support / New Ratio Trade

With MAKO selling off hard -9.75 and at Long Term Support at 14.90 (See Monthly Chart), and with option volatility still high, (near 80)a Ratio call spread looks good here.

 So I'm Long the MAKO Aug 15 calls and short twice as many Aug 20 calls for a net debit of $1.00. Risk / Reward looks like this: At Aug expiration, Profitability is between 16.00 and 24. Max Profit is at 20 ($400 per spread). Risk is $100 per 1x2 15.00 This spread is a loser at expo above 24 and will lose point for point (on the number of NET short calls, in this case 5) with the stock on the upside above there.So if 5 spreads were placed:

Long51.7015Long Opt050010001500200025003000
Short100.3520Sht Opts000000-1000
Net Debit500Ratio Trade-50005001000150020001500
Long Opt3500400045005000550060006500
Sht Opts-2000-3000-4000-5000-6000-7000-8000
Ratio Trade10005000-500-1000-1500-2000

*note prices have changed since this trade was 1st attempted, in fact mid point of bid/offer is priced at .90 currently 1.50 vs .30.

This is trade analysis, not a recommendation.
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