Opening (IRA): SMH January 17th 130/225 Short Put Vertical

... for a 3.40 credit.

Comments: Adding to my SMH position on weakness, but using a setup with a lower buying power effect (BPE).

Here, I'm selling the 25 delta put and buying the put that is at a strike that is approximately one half the value of the short put strike to bring in the buying power effect by about half over going with a naked short put. The standalone 225 would cost about 221.54 to put on versus the 91.60 in buying power for this trade, with a resulting bump in ROC as a function of BPE.

Metrics:

Buying Power Effect: 91.60
Break Even: 221.60/share
Max Profit: 3.40
ROC at Max: 3.71% (versus 1.53% for the naked)
50% Max: 1.70
ROC at 50% Max: 1.86% (versus .77% for the naked)

Naturally, the warts on this setup is that I remain subject to assignment risk at the 225 strike, so need to keep that in mind as I put on trades, since BP will have to be free in order to accept assignment of a one lot at 225.

手動結束交易

Money, take, run ... . Closed for a 2.75 debit; .65 ($65) profit.