SATS2 With PUT Option Strategy Part 2

From the SATS2 entry point in August (figure 3.3), price makes a sharp up move with an up window.

It looks like it is best to keep the inclination of the uptrend line as given by a number of bars at the start of the uptrend.

Of course we then have to keep an eye on the support lines. 

 

Figure 3.3: Uptrend line broken, opening new PUT contracts.

This basic uptrend line is broken September 24. We are allowed to buy PUTS for an amount of $650 (50% of available capital).

09/24/2003: stock price $11.55; strike price $10; expiration date January 2004; PUT unit price $0.34; buying 19 contracts for a total cost of 19*$0.34*100= -$646.

We keep a stop around $12.5, a top before the last top to maintain an acceptable loss.

Price moves down only shortly (figure 3.4) and then turns up again breaking a short term trendline and with SATS2 still in the buying area.

Figure 3.4: Downtrend line broken and SATS2 still in buying area.

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It is best to close the trade.

10/06/2003: stock price $12.16; unit price $0.20;
closing 19 contracts 19*$0.2*100 = $380.

Profit/loss = $380-$646 = -$266.

Available cash for next transaction = $1,022.

 

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