$BAC Options Action trade #2 - scott

7sep - on the options action web extra , scott has a trade on BAC, here is the video clip, web extra . a better format would have been to feature this trade on the main show since what scott says directly contradicts mike khouws trade on BAC and use the web extra time for another stock. anyway, scott doing a risk reversal

buy the DEC 8/9 risk reversal (sell the 8 put and buy the 9 call) for a .12 credit

i like risk reversals. as usual my comment is that the information that is left out of this segment is that this is not a free trade, since you are selling a Put, you need to set aside that margin/buying power to actually buy the stock at 8 if it "gets put to you" at Dec opex..so figure $800 per one-lot. alot of traders that do risk reversals / sell cash secured puts always say they would be ok owning the stock at that level if it indeed drops.. thats all well and good if you mean it but most opt out and take a loss vs buying the stock. if the stock starts moving up you profit right away as the call gains and the Put decreases..scott is looking for a significant move he says..if that happens, look to close your short put as a minimum to get out of that margin requirement.. also possibly selling an upside call as well to lock in gains / bring in some added premium. there is going to be resistence at 10ish so i would target selling the 10call when it came to that. see all of scotts on - air trades in this google docs spreadsheet

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