BTO 5 MS April 17 '10 $30 Call @ $.50
STO 5 MS March 20 '10 $30 Call @ $.19
for a net debit of $.31. This trade cost me a cash outlay of $155.
This is a bullish position. MS was trading at approximately $27.10
The idea here is that I think MS is going up but instead of taking a long directional bet, I hedged myself slightly by going short the near month option. This allowed me to collect some premium and lower my cost outlay as well as take advantage of theta or time decay which is greatest in the front month options (which I'm short).
I closed this position on 3/2/2010 at 11:16:21 AM
STC 5 MS April 17 '10 $30 call @ $.69
BTC 5 MS March 20 '10 $30 call @ $.24
for a net credit of $.45 or cash in of $225. MS was trading at approximately $28.79 at the time this transaction closed out.
Had I just gone long the stock, I would have made $28.79-$27.10 or $1.69 or 6.2%.
Stocks vs. Options (assuming no commissions)
Going long $155 worth of shares would have netted me $9.67
Using this Calendar spread and going long $155 netted me $70
Final profit/loss on this position including commissions:
207.37-172.63= $34.74 or 20.12% in 20 calendar days
nothing to write home about.
Total PnL for the year $916.73. Only $29,083.27 to reach this year's goal
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