SATS2 With PUT Option Strategy Part 3

From the SATS2 entry point in August (figure 3.5), we can now adapt the first trendline up to the new turning point end of September.

Next we see a slight acceleration with a new turning point end of October and finally from here the last one is still much steeper.

 

Figure 3.5: Accelerating trend with a new PUT buying signal end of November.

Breaking the third uptrend line is a new buying signal for PUT options.

11/18/2003: stock price $17.33; strike price $15.0; expiration date April 2004; unit price $0.65; buying 8 contracts for a total cost of 8*$0.65*100= -$520.

We keep a stop at the resistance line of the previous top.

Price moves down only a couple of days and then back up close to our stop level (figure 3.6).

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Figure 3.6: Downtrend line broken, closing the PUT options.

However it turns down again rather sharp at first (dashed blue line).

A previous support line is now giving resistance. This turning point allows a less steep trendline.

This downtrend line is broken December 23.

12/23/2003: closing stock price $14.67; unit price $1.35;
selling 8 contracts 8*$1.35*100 = $1,080.

Profit/loss = $1,080-$520 = $560.

Available cash for next transaction = $1,582.

We wait for a new SATS2 entry signal.

 

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