Real Deal – Feb 2016 #3 (XLE – Bear Call Spread)


Feb 2016 #3 (XLE – Bear Call Spread)
Enter XLE Bear Call Spread, 29 DTE and capture $0.82 ($82 per options contract) premium. Options detail as per the screenshot below.

Rationale:
1. Strong resistance @ $58.50~59.00, expect bearish candlestick to be formed (likely piercing patterns).

2. I am risking $354 to make $246 in the next 29 days. As long as XLE remain below $58, I will profit $246. If XLE price goes against me within the 29 days, I will repair the trade base on the market condition and my perspective of the market. Follow up on this position will be blogged in the future post.

3. The Return On Margin of the trade is 69% ($246/$354) in 29 days. However, I have the tendency to capture 50%-60% of the premium rather than 100% of the premium (meaning I will not wait 29 days to profit $246, I will close the position if I capture ~$120). This allows me deploy my available dollar to other trades and also avoid a winning trade to become a losing trade. 

Stay tune for my next updates!

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