Saturday, October 31, 2020

NEW UCPTD - ROLLING OPTIONS CASE STUDY - CSP DKNG (LOSS)

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
COMPANYSYMTYPESTRIKEPREMIUM
DraftKingsDKNGCSP$49.00$5.05
SHARESPREM $CoC%
500$2,525.0010.31%
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
STRIKECURRENTDOWN?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 CBCURRENTLOSS?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 PREMBUY BACK 1SOLDBUY BACK 2SOLD
$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 LOSSSP PROFITSNEW LOSSSTOCK GAIN
-$4,230.00-17.27%-$1,125.00-4.59%

 

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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.
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