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This vertical spread trade was entered on January 17th.

SRS traded at $19.40 at the close on Friday July 17th.  Both Call options, the one bought (long) and the one sold (written), expired worthless.

We have realized our maximum loss of $3.50 (+ trading costs) or $7.80 (+ trading costs), depending on the strike prices chosen.  Our loss represents a 100% loss of the money at risk.

NOTE:  I am including this trade as a 100% loss, HOWEVER, SRS traded upto $111.22 on March 6th.  The low beteween these dates was $48.00.  IF we had placed a trailing stop order (to be explained in another post) we could have avoided this loss AND this trade would have been a WINNER of probably 75% OR BETTER.  I did not include these instructions in this trade, because I have not explained what a trailing stop is.  I would have had a trailing stop of 20% on the price of SRS (it would have been this large because of the volatility of SRS), which means that we would have exited this position when SRS was trading aroung $88.50-$89.00.

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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 $5.65 at the close on Friday 02/20/09.

 

The GGBBU (Feb 2009 7.5 Call) has expired worthless. The KDMAZ (Jan 2010 2.5 Call) is now trading for $3.50.  We are currently down $0.55 and will wait for another trade.