AlexanderGotay
Giá lên

86% probability trade on Costco (Ratio Spread)

NASDAQ:COST   COSTCO WHOLESALE CORPORATION
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18
265 4

After last earnings Costco had a 14% down move. If we take into consideration last year, we have a CVPOC at around $150 Price, and in the shorter term the VPOC is around $167 (2017). That means that those prices are the ones that have traded the most and considered fair for the stock.

With an IV Rank at 67 we can sell some premium, so given the down move I sold a 3:1 Ratio spread for $1.66.

This gives us a max profit of $665 at the $150 level and if it stays above $155 price we would be making $166 at expiration.

Our probabilities of profit are very high at 86%

The trade:

Sell (3) AUG18 155 PUT
Buy (1) AUG18 150 PUT
Đóng lệnh: đạt mục tiêu
Just started my Youtube Channel Check it out: https://www.youtube.com/channel/UCyhYJiT9NLNzJYjqbl9GA2A
Hi Alexander, What is CVPOC? VPOC? As new option trader I am not familiar with Acronyms
Phản hồi
@gillite, Hey Gillite. Its not an option term. VPOC means Volume Point of Control, from volume profile indicator. Volume profile basically puts the volume by price, and not by time like usually is shown. So the VPOC is the price with the highest volume, using auction theory it means that is the price where both buyers and sellers find it to be a fair price (because is where most trades where executed). Since is what is considered a fair price, the higher we are above that point it can be considered expensive price, and the lower we are it can be considered cheap, so a lot of time price will come back to that point. This gives us a good idea for targets or to identify areas where we get 2 sided action or chop.

Hope that helps.
Phản hồi
gillite AlexanderGotay
@AlexanderGotay, Thanks, that helps.
love your trades.
Phản hồi
@gillite, Thanks, anytime.
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