Fundamentals:
1. XOM released its earnings report on 10/29/2009. The stock drops after the earnings.
2. EX-date for dividend on 11/11/2009. In the past year, after the dividend date, the stock drops $2- $6.
Technical:
1. MACD sell signal, RSI at 49, and 5ema below 20ema
2. 50 sma at 70.6. Might serve at support
Expectation: Price is between $73 and $70 at 2009 Nov expiration.
Trade: Stock at $72.43
BTO 2010 Jan 75 put at 4.83
STO 2009 Nov 70 put at 0.86
Net debit 3.97
BE at $73.2
Delta -28.
Maximum risk: $3.97. Max profit: $2.1.
PE: 20% gain
SE: Roll short call up/out if very bullish
Posts
Joseph,
ReplyDeleteThanks for the trade.
I think this is a brilliant trade.
The stock is having a resistance around 73.5 and a support at 70.
Thus it is a high probability trade
One correction: on SE, it should be roll short put up/out if very bullish
ReplyDeleteXOM supported at $71.16. Today it formed morning star candle pattern. It means that the downward movement likely ends. Adjust the trade:
ReplyDeleteRoll Nov 09 70 short put up and out to dec 09 75. It is a put calendar now.
put. Credit 3.49.
New cost base:0.48
new BE (Dec expiration): 72.08 and 77.97
I should have waited one more day to do the adjustment.
ReplyDeleteLessons learned today: One day does not make a trend.
ReplyDeleteThe candle pattern did not complete a morning star pattern.
Joseph,
ReplyDeleteI think the overall market may still have some leg to push the SPX to 1100.
What I am not sure is whether it will lose steam by option expiration this month. So, I avoided any bullish positions until situation are clearer.
XOM actually demonstrates some bearishness - it is peaking 74, MACD has turned negative, RSI is also negative, MA also cuts negative.
For big stock like XOM, I will probably be interested if they next show some support probably at 60-62 level. But the overall market may still push the stock up in the next 2 weeks. So your trade may not be a mistake.
This stock has a lot institutional following who are trying to generate income.
Close the trade today at 0.8. Cost base 0.48.
ReplyDeleteProfit is 0.8/0.48= 0.32.
66% ROI for this trade