Wednesday, May 30, 2007

Quick Update

Well, I made a couple of profitable daytrades on Network Appliance (NTAP) today. One was short from near the open, covering at $31. And, the other was long at 30.80 and covering at $31. Just a couple of trades in good fun.

Anyway, I rolled the profits into a bear put spread on NTAP. While I do think there might be a buying opportunity in NTAP if it were to continue its slide to say $28, I believe that in the very short-term it is likely to see $30. I could be totally wrong, but what else is new.

I picked up the spread for a debit of $1.25. Long the June 32.50 puts (NULRZ) at 1.55. Short the June 30 puts (NULRF) at 0.30.

Ignoring transaction costs, here's the gist of the trade.

Worst case scenario: NTAP at 32.50 or above on June 15 expiration. I lose $1.25 per contract.
Best case scenario: NTAP at 30 or below on expiration. I profit $1.25 per contract ($2.50 value less the $1.25 debit).
Break-even scenario: NTAP at 31.25 on expiration.
All other in-between price points: The profits and losses are progress linearly.

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