Closed: Profit $92
|RAD Short Call Spread|
|RAD Jul02 $8.50 Call||-5||0.292||0||146|
|RAD Jul02 $9.00 Call||5||0.108||0||-54|
Going for a bearish spread on RAD today. I am neutral to bearish on the direction on the stock and implied vol is relatively high, even though it has already started a decline. The put skew indicates negative sentiment with high prices pushing up the implied volatilities.
At 37% implied at the money vol, the $8.50/$9 call spread gives a breakeven point of $8.90 on the upside. With 12 days to go there is a 74.21% chance that the stock will remain under this price by the expiration date.
At 5 contracts, I will make $100 if the stock remains below $8.90 but lose $150 if it rallies above that level by 2nd July.
Post Friday's session, RAD ended the sessio slightly positive but the position is down $45.50 already.
RAD closed the week out at $8.39, below the $8.90 upper limit. Both calls expired worthless so the spread was profitable by the premium received when establishing the trade of $92. Here's the chart;