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GGB Closed on Friday June 19th at $10.18.

We started this trade on January 27th

We had an update here, herehere and here.

The call that we sold has been exercised, the call the we held long was used to cover the trade.  We had a gain of $1.10 on an initial capital requirement of $4.20, including all trading costs.  This represents a 5 month gain of 26% ($1.10/$4.20) or almost 63% APR.

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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

———————————————————————————————-

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.

————————————————————————————————————————– GGB is now trading for $5.06 on Friday 03/20/09

 

Buy the GGBDA         April 2009        $5 Call                 $0.10

 

Maximum Loss is now     $3.75 (+Trading Costs)

————————————————————————————————————————–

GGB is now trading for $6.88 at the close on Wednesday 04/22/09

 

Sell the GGBFU           June 2009         $7.50 Call            $0.45

 

Maximum Loss is now     $3.30 (+Trading Costs)

If this option is exercised we will have a gain of $1.70 ($7.50 Call sold exercise – $2.50 Call bought exercise – $4.40 Call cost + $0.35 Call sold expired + $0.40 Call sold – $0.10 Call bought back + $0.45 Call sold that was exercised).  This would produce a return of 42% ($1.70/$4.05) in 6 months not including trading costs.  Assuming $0.15/trade/per share (which is conservative), 4 trades = $0.60 trading costs, the return is $1.10 or 26% in 6 months.  We are still hoping that GGB does not trade above $7.50, yet and, we will be able to sell more options from now until January.

 

 

 

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

———————————————————————————————-

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.