QQQ 336/332 Put Spread (Mar 7)
Updated
This was an order that I had input this morning when going through the my broad market charts. Reasoning is below:
1. Clear support at 352.75 (White line)
2. Long term bullishness on equities, especially if inflation continues. Caveat to this is that with rising rates I do think Tech will feel the pain more than other names. As such this position is 1/2 my usual size.
3. Yellow line (338) identified as recent low, and middle of a lower trading range from Apr / May.
Yellow line then acts as target for the short leg. I.e if I take this trade, the short leg must be below this.
As such, I found the 336/332 spread that paid 10% Return on Margin (or risk) and was below my target.
Set the order this morning and it filled a few minutes ago as the market came down a bit.
Questions, Comments, Leave em below!
1. Clear support at 352.75 (White line)
2. Long term bullishness on equities, especially if inflation continues. Caveat to this is that with rising rates I do think Tech will feel the pain more than other names. As such this position is 1/2 my usual size.
3. Yellow line (338) identified as recent low, and middle of a lower trading range from Apr / May.
Yellow line then acts as target for the short leg. I.e if I take this trade, the short leg must be below this.
As such, I found the 336/332 spread that paid 10% Return on Margin (or risk) and was below my target.
Set the order this morning and it filled a few minutes ago as the market came down a bit.
Questions, Comments, Leave em below!
Note
Update with Answers for some of the questions from the comments below:1. Bought or Sold?
This was a credit spread, where I received a credit for accepting the risk of the spread.
2. Credit received = $44 at time of entry (you can get more now as the market pulled back some)
3. Max risk = width of the spread ($4) - Credit received * 100 shares =
4 - 0.44 x 100 = $356
With options trades like this I look to enter with a probability of profit of 80% or greater, which is why I accept a lower risk to reward ratio. In addition, I will use take profits and stop losses to increase this probability of winning and reduce max drawdown.
Note
Closed this yesterday for a -220% loss (1.62 debit). As it was approaching my short strike. I may re enter this trade with a lower strike, but as I am still a part time trader and this week is busy with work, I closed it while on the road yesterday and didnt bother rolling. Proof is in the pudding, we cant win every time :)
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