As I talked about in the Trading Room class, there are 4 different ways to put on this trade.  There is no difference in risk/reward, break-even points, etc. in any of the combinations below.

Bull Call spread 310/320  bear call spread 340/350
bull put spread 310/320   bear put spread 340/350
bull call spread 310/320  bear put spread 340/350
Bull put spread 310/320   bear call spread 340/350

All these trades have the same risk graph and all will need the same treatment at expiration. Any option spreads that are in the money will automatically be exercised at expiration.  For instance, if you had a bull call spread at 310/320 and the stock closed at 330, you would buy the stock at 310 and sell immediately at 320.  You would make $10 on the stock minus you original debit (usually $4).  This is done automatically over the weekend.

1. If the stock closes between 320-340, do nothing.  All options will either expire worthless (If you used credit spreads) of will be exercised at full profit.

2. If the stock closes above 350 or below 310, do nothing.  All options will either expire worthless or will be exercised at full loss. ($2.45 on this trade)

3. If the stock looks to close between 310-320, you will need to close out that leg of the trade (buy the option you sold and sell the option you bought) and let the other leg expire worthless or be exercised at full profit.

4. If the stock looks to close between 340-350, you will need to close out that leg of the trade (buy the option you sold and sell the option you bought) and let the other leg expire worthless or be exercised at full profit.

Hopefully this helps!

We are still in a bear market; but, we are experiencing a bear market rally at this
point.  Most of the time, these rallies will last 6-8 weeks and run about 20-25% off the
bottom.  Until we have improving economic conditions…or at least sideways, we will
still be in a bear market.

It took me a long time (probably a couple years) until I could “plug my nose” and go long
at times like these.  Emotionally, you don’t have any desire to play the long side and
the thought of buying a stock…especially a financial stock makes you sick.  At times
like these, just make sure you are buying stocks that were strong in the market crash. 
This way, you know you are most likely buying a higher quality stock.  And after that,
make sure you have protection (stops, options, etc.)

One strategy you may want to look at is a bull call spread.  It is a low risk trade that
you may feel comfortable making.  Matt goes throught them in the Advanced Options class.

Thanks,
Robb

When a company sells stocks, it is important to know if this was stock they already owned (called Treasury stock) or if they are issuing (creating) new shares. If they are simply selling treasury stock, there should be little to no effect on the stock. If they are issuing new shares, this typically has a negative impact on a stock since this creates dilution of the current shareholders. Imagine you own 10,000 shares of a company that has 100,000 shares total outstanding. You own 10% of the company. However, lets say the company issues 100,000 more shares to raise capital, the value of your investment would go down since you only own 5% now.

The only time investors don’t mind a new stock issue is when they are issuing stock to buy a new company. In our prior example, if the company used the money to buy another business the same size, you would now own 5% of a company that is twice as big. As you can see, your investment didn’t really change in value.

But, one last thing about trading news events. I said this many times in the Trading Room, “understanding the news isn’t important. The reaction to the news is what we need to understand.”

Hopefully this helps,
Robb

I can’t believe it’s launched. Building this site has been a real labor of love, and we aren’t through yet! Keep coming back often to read our updated blog. and in the coming weeks our exclusive Members’ Area will be available. In the mean time please enjoy our site and if you have any questions about the exciting world of trading please contact us at support@mavericktrading.com.

P.S. We often do FREE live webinars, if you would be interested in attending one of these send us an email and we will be sure to invite you to our next one.