Last week, my first installment of "Playing the Expiry..." proved popular and profitable, so here is another post for option traders to consider. Again, as always, before implementing any strategy, understand the full risks of all trades discussed today.
Again, Google [GOOG:NSD] appears to be back in play. It's highly-priced stock comes in handy for those looking to the options. Today, we will do a bull call spread for the Aug27 weekly options. Here is the strategy and its potential profit.
Google is currently trading at $453.23, down $1.39. The 440 call (long) is priced $13.60 x $14.40 and the 450 call (short) is priced at $5.50 x $6.00. In a worst case scenario, if your fills are at the market or natural price, your net cost is $8.90 or $890 per contract excluding commissions. Because of significant support at $450, Google has a high probability of remaining in the money, allowing you to profit $1.10 or $110, which is a 12.35 per cent return. Not a bad return if you do ask me.
Your profits can be improved by attempting to fill your buy and sell in between the bid and ask prices. My fills were $14.30 and $5.80, saving me $0.40 a contract, allowing me to earn an additional 5 per cent profitability and lowered break-even points.
Remember to close both options out (if needed) before the 4 PM EST close on Friday, to avoid paying exercise/assignment costs on the options.
P.T.E. record book located at the top bar, to the right of "MAIN".
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