Sep 18, 20212 min
Hey Advanced Traders!
AMD is still trading sideways. If you've been setting up your bear call spreads on AMD for a while, you most likely have been noticing your two legs shrinking in value due to time decay. You can consider closing some of your positions to lock in your profit or you can set up some more spreads to stagger your expiration dates and strikes.
Similar to last week, AMD is currently bouncing around between $104 and $112.
Here are the details of the bear call spread:
Expiration Date: October 15, 2021
Step 1: Buy 1 $140 Strike Call (Delta 0.02) for $10
Step 2: Sell 1 $115 Strike Call (Delta 0.18) for $98
Step 3: Set up a buy stop order for 100 shares at $114
Profit/Credit Received: $98 - 10 = $88
The goal is for AMD to trend neutrally from now until the expiration date.
If by expiration, AMD stays below $115, both your call options will expire worthless and you will get to keep the entire $88 credit.
If by expiration, AMD goes above $115 you will purchase 100 shares of AMD at $114 and convert the trade into a covered call. You can then sell your first $140 strike call leg.
Scaling Your Contracts
A lot of you have been doing incredibly well with setting up your bear call spreads. Remember that you can scale your contracts if you have an account size to do so.
If you have 1 contract open, that results in an $88 profit.
If you have 10 contracts open, that results in an $880 profit.
If you don't have an account size to do multiple contracts yet, don't worry. Your goal is to consistently deposit more money into your account, so the value can compound over time.
Like always, feel free to tweak the numbers around so it fits your own risk tolerance.
Stay safe and healthy!
Steve and the Call to Leap Team
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