Medium term
Trade view / 11 October 2016 at 14:28 GMT

Moving in on Cisco's Nov16 32/33 Call spread — #SaxoStrats

Head of Futures & Listed Options / Saxo Bank
Denmark
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Background

Cisco is in a consolidation phase and is stuck in a daily triangle. RSI and Stochastics are slightly bearish in a neutral zone. Let’s sell the Nov16 32/33 Call Spread (expiry November 18) to cash in some premium with limited upside risk. 

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Source: Saxo Bank

Management and risk description

Entry: Sell CSCO Nov16 32/33 Call Spread at $0.31
Sell CSCO Nov16 32 Call at $0.58
Buy CSCO Nov16 33 Call at $0.27


Maximum Profit at expiry is limited
Maximum profit at expiry is limited to the premium received $0.31
Maximum Loss at expiry is limited
Maximum loss is: long strike price – short strike price – premium received
                          33 – 32 – 0.31 = $0.69
Note that you maximum loss will be equal to the margin you need to post the trade
Return on Investment at expiry if the market closes at 32 or below
= Premium received/margin posted X 100
= $0.31/$0.69X100
= 44.90%


Target at expiry: 32 or below.

Time horizon: 38 days.

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more
11 October
Georgio Stoev Georgio Stoev
Good day to sell a short spread, volatility up.

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