Closed: Profit $71.40
Symbol | Position | Price | Close | P&L |
---|---|---|---|---|
MU Long Put Spread | ||||
MU Jul02 22.50 Put | -1 | 0.222 | 3.43 | -320.8 |
MU Jul02 23.50 Put | 1 | 0.508 | 4.43 | 392.2 |
Total | 0.286 | 1 | 71.4 |
Micron Technology (MU) showing some high vols with a decent downtrend. Stock has been pretty choppy but the overall trend for the past year is negative. The shares have just slightly bounced off recent lows, so I probably should have waited a little longer to establish this position but the payoff profile looked pretty good as it was.
Breakeven on the downside is $23.46, which based on the current stock price of $24.22 and 37% vol gives only a 28.13% chance of trading below that. But the payoff if below is $73 compared to a max loss of $27 if the stock stays above that by expiration.
The vol skew paints suggests that the market expects the stock to rally as the call prices increase;
And here is the historical vs implied vol graph;
I placed my order to buy the $22.50 and $23.50 put spread for a debit of $27 and was filled on that order;
Update 3rd July
MU closed the week out at $19.07. The put spread expired at its' max value, less the premium paid leaves a profit of $71.40. Here's the chart after the close on Friday;
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