5/11/2012 -
closing out this trade on the spreadsheet per 2 of Dans tweets:
Risk Reversal @RiskReversal from 8may
Closing half of the Morgan Stanley (MS) put fly discussed on @optionsaction for a double, other half rides: http://t.co/aeJCkYdk --- closed half at .46
Risk Reversal @RiskReversal - from 11may
2nd Trade Update: Morgan Stanley (MS) Closing 2nd Half of May Put Fly 3.5x What I paid. http://t.co/zl1JLtE5 - closed rest at .85
per his original comments, dan took profits on half when this put fly moved in his favor and let the rest run, and took remainder today.
bought MS May 16/14/12 put butterfly for .23
closed at .46 and .85.
Point on this trade management, with butterflys, a system that works well is that if it moves in your favor, take profits on enough lots to get your original money back and let the rest run..you dont have to hold it to opex. a winner by Dan.
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4-13-2012 on tonights show Dan layed out a bearish trade on morgan stanley. he had a bearish thesis that would cover both earnings AND general market conditions. so this is not just an earnings event, although it will be a catalyst. his trade in in this video segment --> video segment . He had a "put butterfly"
Buy one May 16 put for .45
Sell two may 14 puts for .26total
Buy one may 12 put for .04
total debit .23 ($23 for a one lot). max profit at 14 pin at may opex is $1.77 , For a 10lot cost will be $230, with max profit of $1770. max loss is that .23 you paid.
Scott as usual doesnt add anything usefull to the conversation and would probably confuse alot of people but dan brings it home at the end of the segment. emphasizing that if trade moves in his direction to close out half of the lots to get your cost back and let rest of it run.
my comment is that since its a may butterfly even if stock moves down to 14 quickly you will not see that max gain. that max gain is at May opex which is what i think scott was trying to say. I like this trade mainly because its a low cost way to take a directional postion. you can even do this as protection if you are long the stock.
