11th August, 2006

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4 Days have now passed since putting on this bet and XOM has moved a little in our favour. Here is the chart (click to enlarge).

Source: Market Club

Unfortunately, our call backspread option trade is showing an unrealized loss of $60 per option spread. Here are Friday's closing option price levels:

Source: VOptions

At this point, with only 8 days until the options expire, I doubt that the stock will rally past our upper breakeven point of $80.85. But that's what's great about backspreads.if the stock falls now past $69.15 we start making money. I mean, it was a long shot going for such a massive move in such a short period of time, but now if the stock trades the other way we can still make money.

In hindsight, I guess a better way to have traded this would have been to choose lower priced strikes. That way our upper breakeven point would have been closer to the current stock price. So now, we are hoping that XOM has finished its short term trend and drifts lower over the next week or so. Next ->