Friday, July 6, 2012

amzn bull put vertical

So here's an example of my current trading chart and style:

AMZN Weekly with seasonal projection.
The setup I am looking for is a liquid, triple-digit stock with a strong season coming up and is on-track for a repeat. The green arrow indicator is the PPS indicator and it is signaling a turn into the season. Then I want the stock to pull back into the body of the previous bar a little as AMZN did today.

The trade I took is called a bull-put vertical spread. I sold the August 220 put and bought the August 215 put simultaneously for a $1.75 credit. This has a maximum risk of $3.25 per spread and I put this spread on 3 times for a total risk of about $1,000 and a total potential gain of about $500 - a 50% return on risk.

The probability of success, if held to expiration, is about 60%:

I keep a limit order on to buy these back for 1/5 of the price I sold them, so I don't usually hold these into expiration.

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