Closing NKE ITM Bear Put

I'm going to set a limit order to close this trade now. I could make $0.65/share in the best case scenario. Right now I could easily get out of the trade with close to half that. While $0.30/share does not seem like a lot, it is almost a 7% ROI in only two days. Anytime I can get out of a trade in only two or three days with 6 or 7% I'm taking the money. My limit order is going to be a limit credit order for $4.70.

NKE ITM Bear Put

I'm opening a trade tomorrow morning that is somewhat out of the box.  I will buy to open an Apr11 In The Money Bear Put on NKE.  Nike, Inc. reported its quarterly earnings last week and had a huge drop with very significant volume.

With $80 per share setting in as the likely new resistance level an ITM Bear Put will work similar to a credit spread.  The trade will consist of an Apr11 $85 strike long put and an Apr11 $80 strike short put.  The net cost of the trade is $4.35 with a $5.00 spread.  This means that if the stock price stays below $80 per share, stock will be put to me at $80 and I will have the right to sell at $85 for a $5.00/share net gain.  Subtracting the net debit of the trade ($4.35) I will see a profit of $0.65/share.  On a $4.35 debit that is a 15% ROI.  The sooner the stock is put to me the better. 

Closed AAPL

I bought my AAPL 330/325 bull put credit spread about five hours after opening the spread.  Why?  Because I had roughly 2/3 of my maximum profit in that time, so why take the risk holding onto the trade for three more days for only another 1/3 profit.  I'll take 8% profit in 5 hours any day.

AAPL 3 day bull put credit spread

With the U.S. stock marketing selling off sharply at the open, following Japan's Nikkei Index dropping off 11%, I started watching the chart on AAPL.  AAPL opened $11 lower than where it closed the previous day and I believe AAPL will stay about where it is now or rally between now and expiration Friday, which is in three days.  So I sold the March 2011 330/325 puts for a $.60 credit.  While I'm hoping to enjoy over a 13% return in three days, I realize this is a high-risk trade.  Although there are a few adjustments I could make if this trade goes against me, I am not willing to take ownership of AAPL stock at $330 so I'll  be monitoring this trade closely and if AAPL breaks below $335, I'll close this trade out.

Welcome New Members From Sacramento MAP Group (and Guests)

On Saturday the 26th of February I had the privilege of sharing some our methodology and strategies with an investment group in Sacramento called the MAP Group.  I had a wonderful time and received some very nice compliments from the group members.  I wanted to thank them for the opportunity and for the wonderful hospitality.  I also want to welcome those who have now joined the SOS community.  We look forward to your comments and input in our trading community and also look forward to your continued trading success.

Jeffry Dunyon
President
Safe Option Strategies