| All rights reserved - Core Position Trading, LLC - 2020 | ||||
 | CASE STUDY TRADE | |||
| ROLLING OPTIONS TO MITIGATE LOSSES | ||||
| DISCLAIMER: This trade is based on this date. I'm not suggesting a move up or down. I'm showing my trade that I have already done. I'm not recommending this stock as a purchase/trade. Think of it like this, I'm 'Showing you the World thru my Eyes'. | ||||
 | ||||
DraftKings | ||||
| TIME AND DATE STAMP | . | Friday, October 30, 2020 | |||
| AT THE TIME OF THIS BLOG POST THE STOCK PRICE WAS > | $35.49 | |||
| THE ORIGINAL TRADE IDEA + EXPECTATIONS | ||||
| COMPANY | SYM | TYPE | STRIKE | PREMIUM |
| DraftKings | DKNG | CSP | $49.00 | $5.05 |
| SHARES | PREM $ | CoC% | ||
| 500 | $2,525.00 | 10.31% | ||
| DKNG had fallen for various reasons recently so I felt pretty comfortable with selling a Cash Secured Put at this strike price not believing it could fall further. | ||||
| THE TRADE HAS GONE WRONG - LOSS IF SHARES ASSIGNED | ||||
| STRIKE | CURRENT | DOWN? | TOTAL LOSING POSITION | |
| $49.00 | $35.49 | -$13.51 | -$6,755.00 | |
| THE CHART TELLS THE STORY | ||||
 | ||||
| DEDUCT ORIGINAL CASH SECURED PUT PREMIUM FOR TRUE LOSS - END RESULT - I WOULD NOW OWN SHARES | ||||
| NEW CB | CURRENT | LOSS? | TOTAL $ LOSS | |
| $43.95 | $35.49 | -$8.46 | -$4,230.00 | |
| Well, I was horribly wrong as the overall stock market has sold off and so has DKNG to the point where this original trade just does not make sense anymore to go to expiration and be assigned the shares. So at this point in the trade ... I'm stuck with a stock that is down -8.46 pt ... I've decided to ROLL DOWN and try to collect another credit | ||||
| THE POWER OF SELLING PREMIUM - ROLL OUT/DOWN | ||||
| New Strike Prices are not needed for the rolled new trades as this entire sheet is based on the original Strike which is higher | ||||
| ORIG PREM | BUY BACK 1 | SOLD | BUY BACK 2 | SOLD |
| $5.05 | -$9.20 | $4.60 | -$6.80 | $4.10 |
| $2,525.00 | -$4,600.00 | $2,300.00 | -$3,400.00 | $2,050.00 |
| I have ROLLED DOWN (2) times with this DKNG trade ... each one being documented above ... the final and current trade is to the far RIGHT | ||||
| NET RESULTS FOR ALL MY THE ROLLING TRADES | ||||
| -$1,125.00 | ||||
| Using the POWER of Selling Premium and ROLLING out of trades and managing our trades I was able to mitigate my losses by rolling out and down to where I am at a TOTAL LOSS of $1,125 vs being in the hole -$4,230 with a stock trading so far down that I'd have to sit on the shares until they got close to my cost basis many points higher. Yes, this is a TRUE LOSS and unless I manage this current trade for credit prior to expiration it will be a loss for this trading year. | ||||
| CASH ON CASH % LOSS ON MONEY INVESTED | ||||
| ORIG LOSS | SP PROFITS | NEW LOSS | STOCK GAIN | |
| -$4,230.00 | -17.27% | -$1,125.00 | -4.59% | |
| Remember, the content of this site is for informational and educational purposes only. If you invest using information contained here, do so at your own risk. Please read the full disclaimer posted below and visit cptdashboard.com for my privacy policy. | ||||
| Disclaimer - No - at the time of this posting I did not own the shares of this equity. and it probably means I've done a Cash Secured Put ... for which if this trade goes against me I *will* own these shares ... I risk my own money on this trade and am accountable for the trade results. | ||||
| Image credits - stockcharts.com | barchart.com | foolcdn.com | yahoo.com | earningswhispers.com | ||||
© 2020 Core Position Trading, LLC and the CPT Dashboard - All Rights Reserved | Disclaimer | |||
