If you’ve been wondering if I had been able to trade with things going on like getting the book out and setting up book info Amazon, time with my children plus the fab book event we are cooking up – the answer is yes.
A week ago, I was able to find a good place to put a trade in. This was before yet another summit on the EU debt issues. The stock I was trading — STO was at 13.60 and had been going up steadily for a week, with the Support at 12.30 and Resistance at 13.80. I also thought the price will move down since STO has been trading on a range and it’s time the price move reverses. Clearly there is more chance a profit can be made at the downside and with Christmas slowdown happening, I thought there would be an upside on the EU summit (a celebration rally) but it would be shortlived due to people who would want to take profits before the Christmas holidays.
So I thought, I’d place a covered call on STO when a move down is confirmed. This will let me profit from a move down and still profit even with a move up. (I really wasn’t sure where the market will go but I went with the trade where there is a chance of 3R profit – which is the direction going down.) When placing the trade, I waited for confirmation for a move down – which it did on 6 Dec, when it moved to 13.47 from 13.60. I chose the strike price of 13.00 and expiry of Jan 2012, with a premium of 79cents. At that time I was putting this trade the price of the share was 13.47, so with the 13.00 strike price, the intrinsic value is 47 cents with 32 cents remaining time value (from the premium 79cents). The series name is STOL57.
Here are the details:
Current share price (at time of trade) 13.47
Strike price = 13.00
Intrinsic Value (Current price less strike price) = 47 cents
Time Value (Premium less Intrinsic Value) = 32 cents
With this trade, I will be profitable even if the price moves against my position, share price of 13.79 (Strike price $13 + Premium 79cents). The trade will be profitable below $13.00.
OK what happened the next days after that trade– it was another roller coaster ride, with the market falling 2 days before the summit, then a “hurrah” day after the summit, and then as what had happened before, market fell again “picking apart” whatever agreement there was in the EU summit. STO is now trading below 13.00.
So even with unsure market, there can be sure profits.
Would you like that?
Open Trade STOL57 - UP
STOL57 - Down again!
