Wednesday, April 4, 2012

$NDX trade for $6700


THESIS: this pull back will be short-lived and $NDX will recover from this pullback by April opex.
I can put an aggressive iron condor on for a credit of 13$ or so.
sell 2750/2725 April put spread
Sell 2825/2850 credit call spread
I do this 5 times so I collect 500x13.5ish = $6700
Best case scenario: NDX stays between 2750 & 2825 on 4/20.
Max profit is $6700 (this is the amount I collect today)
Reward to risk scenario is 1.16; as far as bets are concerned this high reward to risk ratio gives me enough comfort to even consider selling a credit put psread that is already in the money.
Max loss is $5800 = 500x$25 (which is the width of the spread) - $6700 (premium I collect).
Btw, if you like these posts spread the word+ folo @racernic. Also peruse rest of my posts including the sides to help finance the java (if you know what I mean ;-). I do these post for free and have no subscription pitches etc.

If I wanted less risk I can sell April NDX 2740/2735 Credit put spread instead:
credit I collect for 5x is 1000
max loss is 1500
best case scenario is that NDX is above 2740 by April opex.
same logic applies as above condor.

THIS IS A RISKY POSITION COMPLETELY DEPENDING ON REBOUND AFTER THIS SELLOFF.


As with any trade there are risks but in this case the I am very comfortable with the dollars at risk. I always try to know and manage my risk; I ask 'what will I lose if the crap hit the fan in the worst possible way.' If I know the answer to this and am ok with it then I should be ok.

THIS IS NOT A RECOMMENDATION OF ANY KIND. I ONLY INVEST MONEY I CAN AFFORD TO LOSE.

$AAPL $AMZN $bidu $SPX $NDX $RUT $C $GS $wynn $SPY $GOOG