Options Trade Of The Week – UAL

Posted in: Options Trading, Trade Of The Week, Trading Article

We continue to see markets driven by headlines here this week.

Everyone’s focus is on the trade war with China, new tariffs ready to kick in over the weekend, and the Trump tweets that seem to come out every few hours.

As a result, markets have been stuck on a roller coaster ride back and forth on a daily basis.

 

Selling Credit Spreads

One way of taking advantage of the volatility is to sell credit spreads. In doing so it allows us to take advantage of the higher priced options and also put time decay in our favor. That way if the market continues to stay choppy we can still make money.

For this week’s Options Trade Of The Week we will be taking a look at selling a put spread on United Airlines (Symbol: UAL).

  • We are going to use the September monthly options with 21 days left to expiration.
  • The trade is placed by selling the 83/81 put spread. In other words, we are selling the 83 put and buying the 81 put at the same time.
  • We are able to place this trade for $.51 or $51 per spread.

The $51 per spread that we are collecting to put the trade on is our maximum profit potential while our risk is limited to $149 per spread.

  • We make money as long as UAL stays above $82.49 per share.
  • We also make money from time decay adding up and from volatility decreasing.

For a complete break down of our Trade Of The Week as well as a look at our open trades from the last few weeks make sure you review the video below.

You will learn the details of how we are placing trade trade including how we plan on managing it from start to finish.

If you are interested in learning how to find these trades, feel free to contact me directly with any questions you might have. Mike@netpicks.com.

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CoachMike

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2 Responses to “Options Trade Of The Week – UAL”

  1. Errol Gunn

    Hi Mike
    What would our profit be if UAL stays above $82.49 at expiration date?

    Reply
    • CoachMike

      The max profit is whatever we collect to put the trade on. So in this case it would be $.51 or $51 per spread. The nice part about this trade is it only took up $150 of capital per spread.

      Reply

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