To the Left-July Call Option Chain
To be clear this is a snapshot of a few ‘near the money’ calls. The prices we are using are from the 1st column on the left. This is the settlement price. You can see these calls have traded at various times and prices during the day.
Equal Premiums
There are 3 trades here for roughly the same amount. Smarter traders will see more complex strategies that can produce the same premiums too. 3′s enough for now.
Firstly- sell the naked 7675 call for 8.5. Nothing wrong with that if you believe the market will not hit that strike. Risk theoretically unlimited.
Secondly short call spread sell the 7600,buy the 7650. Premium (19.5-11.5) =8 Risk at 7600 limited to the width of the spread(50) minus 8= 42
Thirdly a call ratio spread buy the 7550, sell 2x 7600 32.5- (19.5×2)= 7.5 Risk(theoretically unlimited) at 7650 but….. if you like the 7550 level you own that spread 7550/7600-this could bring in another possible 50. There may be times when you can close out this trade for a credit too.
But,Which Trade Is Best?
Whatever suits you is the best trade. Think about how you’d manage if the market really took off to the upside. Look at probable outcomes. Consider that the market can thus do 3 things. It can go up, down, or stay the same. And guess what? Most of the time it goes……………………………………………… nowhere.
Very true..any credit spread is 1:1 chances of winning
the naked call is now 5.5 (sold at 8.5) it has been lower.
the 7600/7650 spread is now worth 6
the ratio spread is now 3 -clearly the winner here.
I have to confess that while we are making money(and missing good trades too) this market is a complete basket case, in my opinion.