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Thread: Avalon's Trade idea 12/26 SNP 11.1% ROI

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    God/dess britneyireland's Avatar
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    Default Avalon's Trade idea 12/26 SNP 11.1% ROI

    Just throwing some trade ideas out there. I entered this trade on Friday.

    SNP Jan Bear Call Spread
    Sell the Jan 70 calls $1.05
    Buy the Jan 75 calls $0.55
    Net credit of $.50

    For every $450 I risk, I make a $50 return if SNP closes below $70 on expiration day in January. That is an 11.1% return in 4 weeks.


    The Trade: To sell the January $70.00 Calls and then buy the January $75.00 Calls. As long as the stock closes below $70.00 on the January expirations day, both options will expire for a profit. If the stock climbs above resistance and then looks like it will close above $70.00 we will need to buy to close the January $70.00 Calls and sell to close the January $75.00 Calls.

    Technicals: A year ago, the stock was trading at a 52-week high of $152.75 and last month prices sank to a 52-week low of $50.02. The stock has a tendency trend lower then level out and then trend lower again. Right now, its looks like prices are consolidating around the 30-dma. The stock trades in the oil & gas industry, which has moved off its yearly low prices. Both the lower indicators are flashing sell signals.


    Background Stock info
    SNP – China Petroleum & Chemical Corp.
    China Petroleum & Chemical Corporation, through its subsidiaries, operates as an integrated oil and gas, and chemical company in the People’s Republic of China and Hong Kong. Its oil and gas operations include exploring for, developing, and producing crude oil and natural gas; transporting crude oil, natural gas by pipelines; refining crude oil into finished petroleum products; and marketing crude oil, natural gas, and refined petroleum products. As of December 31, 2007, the company had proved reserves of approximately 2,651 million barrels of oil and 6,331 billion cubic feet of natural gas. The company’s chemical operations include the manufacture and marketing of chemicals for industrial uses. Its products include various petrochemical products, including basic organic chemicals, intermediates, monomers and polymers for synthetic fiber, synthetic resin, synthetic fiber, synthetic rubber, and chemical fertilizers. China Petroleum & Chemical Corporation has a strategic alliance with McDonald's Corp. to open Drive Thru restaurants at company’s gas stations. The company was founded in 2000 and is based in Beijing, the People’s Republic of China. China Petroleum & Chemical Corporation is a subsidiary of China Petrochemical Corporation
    Rebecca Avalon







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    God/dess britneyireland's Avatar
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    Default Re: Avalon's Trade idea 12/26 SNP 11.1% ROI

    Follow Up:

    Today the stock dropped (along with the rest of the market) to $60.87 (which is roughly where we entered the trade) However, unlike a stock trade, we MADE money on the stock moving absolutely nowhere.

    Again we have two options:
    1. do absolutely nothing and let the options expire worthless. Remember we were paid up front $50 for every spread contract we entered. By letting them expire we don't have to pay the commission fee to buy them back.

    2. Buy them back for $5. That means our total profit is $45 and we also incur commission fees. BUT, we are still profitable and can now go look for another trade.

    I bought mine back.
    Rebecca Avalon







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