This trade was posted January 27, 2009.

Diagonal Spread Example:

Sell GGBBU            Feb 2009    7.5 Call            $0.35

Buy KDMAZ            Jan 2010   2.5 Call             $4.40

 

Net Cost                      $4.05(+Trading Costs)

 

Maximum Loss            $4.05(+Trading Costs)

 

GGB is trading for        $6.54 at the close on Tuesday 01/27/09

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GGB is now trading for $4.85 on Tuesday 03/17/09.

 

 

Sell GGBDA          April 2009     $5 Call          $0.40

 

The KDMAZ (Jan 2010 2.5 Call) is now trading for $2.65.

 

Net Cost                       $3.65(+Trading Costs)

 

Maximum Loss is now   $3.65(+Trading Costs)

 

If this option is exercised we will have a loss of $1.15 (+ Trading Costs) on this Trade Idea, if this option expires we will look at the next trade.  For this trade, we have had the worst scenario for a Diagonal Spread, which is the underlying stock (GBB) has declined dramatically (almost 26%).  If GGB stays below, but near, $5 we should be able to salvage this trade, provided it’s fall does not continue.

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