The first is  simple one, a credit spread, and the second is a Calendar.

At first I only wanted to talk about the calendar, but as I started making the video I showed the credit spread as well.

This video starts by me updating the 2 credit spreads I showed to members last month. I then show the new credit spread trade I put on. And then I get into the calendar.

I discuss, the trade, a possible adjustment, why I chose the strike I did, and what I think the stock will do.

If an adjustment or an update is needed I will post it in the members’ area of the site.

Enjoy!

Click here to view the embedded video.

2 More Fresh Trades is a post from Option Selling.
To learn how you too can earn 8-12% Monthly Returns Safely and Conservatively check out OptionGenius.com

As long as the dollar gets weaker, the markets and GLD will both go up.

But there was an interesting post on another blog Slope of Hope that showed graphically that Gold might be heading towards a retracement. Check it out if you are a Gold Bug.

OK, back to business. The up move today took GLD outside of our upside Calendar break even.

Here’s what it looks like right now.

So what do we do? I don’t want to add more capital to this, even though that is an option.

Step 1. Take off the spread hurting us the most. Take off the 125 Calendar.

Step 2. Now that we are in a better position it is time to determine how to adjust. Easiest way: just add another calendar at a higher strike. We have two options: adding the 131 or the 132.

Here’s the chart when we add 131 call calendars to the 128s we already have:

Double Calendar 128/131 Call GLD Spread

In the middle of the graph we can still make about $450.

Here is the graph of the 128/132 Calendar:

128/132 Double Calendar

The amount we can make on the 132 is lower: closer to $100 but the upside break even is farther away. The 133 Calendar is too far away and the profit at the middle of the graph becomes negative so that is not an option.

Which to choose? Depends on what you think GLD will do in the next week. I normally like to be out of Calendars the Monday or Tuesday before expiration (next week).

If you think GLD will stay put or move down a little, the 131 makes sense. Otherwise the 132 is the best way to save this trade. If we do the 132, and GLD keeps moving up and gets to the break even we will be down about $670 which is around 17%. Right now we are down $450

But hold on! There is another option.

What if we take off the 128 as well and reposition the trade?

Here’s a graph of a 130 – 133 Double Call Calendar. I sold the 125 and the 128.

Double Call Calendar 130-133

I think I like this one best of all: Break evens are 129.39 and 133.77 with the ability to make $400  in the middle of the graph.

Recap: GLD is outside the break even on our 125/128 Oct/Nov Call Calendars. I don’t think GLD will come back into our trade. I think it will stay outside the break evens and so I need to adjust.I am adjusting by selling both the 125 and the 128 Call Calendars for a credit. I entered the trade with a debit. And then I am repositioning the trade by buying the 130 and 133 Oct/Nov Call Calendars. I now have new break evens and the ability to make a decent return.

Calendar Spread Update 10/5/2010 is a post from Option Selling.
To learn how you too can earn 8-12% Monthly Returns Safely and Conservatively check out OptionGenius.com

was channeling and that it would be a good set up for an income strategy.

The only problem was that earnings are after expiration which is in 10 days.

Earnings could move the stock but it also keeps the volatility of the options

high and that means high premium.  There is also a dividend to be paid on the 15th, which is one day before expiration. A dididend will lower the price of the stock by the amount of the dividend which in this case is 10 cents.

His idea was a butterfly. I decided to do a calendar because it is easier to adjust and share it here.

Buy 1 Nov 90 Call and Sell 1 Oct 90 Call. This trade cost me $315. My breakevens are at 86.14 and 94.40.

I feel this trade will work. But it will have to be held close to expiration. 

If POT gets outside the breakevens, exit the trade. or if you are experienced enough, add another calendar on the side of the brreakout.  If POT stays around 90, stay in as long as you can.

Free trade: October 07, 2009 is a post from Option Selling.
To learn how you too can earn 8-12% Monthly Returns Safely and Conservatively check out OptionGenius.com