Trade Journal: 21st Apr 2014 – 3 new credit spread trade for small account

On 21st April 2014, I start a new experiment on building small account value using credit spread. Credit spread allow traders to earn premiums and limit maximum loss. The structure is very versatile to grow small accounts.

In this experiment I use small account with just $5.000 capital. The stock selection is clearly will be the most important aspect for small account traders.

In this experiment I’m using any S&P 500 stocks with options, but I try to stick with the most popular and liquid issue to avoid slippage. Commissions are omitted from calculation.

This first set of trades are weekly credit spreads on AAPL, MSFT and YUM. Below are the details on those trades.


 

AAPL AprWk4 515/505 PUT credit spread : 1 contract
Sell-To-Open 1 contract of AAPL AprWk4 515 P @ $5.45 = $545
Buy-To-Open 1 contract of AAPL AprWk4 505 P @ $2.86 = $286
Net Credit = $259; Max Risk = $1,000; ROI = 25.9% for 5 days trade. 

MSFT AprWk4 40/39 PUT credit spread : 10 contracts
Sell-To-Open 10 contracts of MSFT AprWk4 40 P @ $0.72 = $720
Buy-To-Open 10 contracts of MSFT AprWk4 39 P @ $0.35 = $350
Net Credit = $370; Max Risk = $1.000; ROI = 37% for 5 days trade.

YUM AprWk4 74/73 PUT credit spread : 10 contracts
Sell-To-Open 10 contracts of YUM AprWk4 74 P @ $1.09 = $1090
Buy-To-Open 10 contracts of YUM AprWk4 73 P @ $0.85 = $850
Net Credit = $240; Max Risk = $1.000; ROI = 24% for 5 days trade.


 

TOTAL CREDIT EARNED =  $259 + $370 + $240 = $869

TOTAL MAX RISKED = $1.000 + $1.000 + $1.000 = $3.000

RETURN ON INVESTMENT = 28,96% for 5 days trade.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s