Closing out the Pfizer Put Backspread

Part 1 | Part 2 | Part 3 | Part 4

Update - 20th January 2005

Pfizer ended the week to close at $24.71, which was just enough for this trade to end up a winner.

Our $22.50 puts expired worthless, so we lose the entire premium on those.

However, we were also short the $25 put, which we sold for $1 and closed at $0.30, meaning we made $0.70 on the option, so we kept $70 in premium.

All in all we made $40 per option spread. As a proportion of our max loss of $180 means a net return on investment of 22.22%.

So, our total position looks like this:

Long 2 $22.50 Put Options @ $0.15 - Expired worthless (-$30)
Short 1 $25.00 Put Option @ $1.00 - Closed at 0.30 (+$70)

Net Profit of $40 per option spread or 22.22% ROI.