6-th Option Combination

[Options-trader 10]

I propose you to observe the process of my next option combination conducting.

Size of investment for one combination is 50,000$. For purchase straddle i put no more than 2/3 total amount of investment. The remained sum is necessary for management of a combination. Today i opened long straddle of OXY (Occidental Petroleum Corporation). It has been bought 46 contracts of OCTOBER'12 90 CALL (2.69$) and 46 contracts of OCTOBER'12 90 PUT (4.41$). In purchase it has been spent: 9.45*100*46=$32,660. Further i will conduct the combination.

[Options-trader 10]

The share is near $85. To balance the combination i have bought 46 contracts of OCTOBER'12 85 CALL ($3.50). In purchase of third position it has been spent: 3.50*100*46=$16.100.

[Options-trader 10]

Today the price of the share decreased to $82.25. Profit of combination is $0.50, it is too small. So i have opened short position - 46 contracts of OCTOBER'12 80 PUT (2.60$).

This position is covered by long OCTOBER'12 90 PUT. The investments were reduced to $8.0 per unit (total investments to combination now is: 8.0*100*46=$36.800).

At the moment of opening short OCTOBER'12 80 PUT premiums of long positions were: OCTOBER'12 90 PUT - $8.80, OCTOBER'12 90 CALL - $0.52, OCTOBER'12 85 CALL - $1.85.

[Options-trader 10]

The share is near $86.7. Premiums of the positions of the combination are: OCTOBER'12 90 PUT ($5.15), OCTOBER'12 90 CALL ($1.37), OCTOBER'12 85 CALL ($3.75), short OCTOBER'12 80 PUT ($1.12). Today i have closed short OCTOBER'12 80 PUT ($1.12). The investments were increased to $9.12 per unit. Total investments to combination now is: 9.12*100*46=$41.952. Current profit of the combination is $5.290.

[Options-trader 10]

The share is a little over $90. Premiums (average) of the positions of the combination are: OCTOBER'12 90 PUT - $2.60, OCTOBER'12 90 CALL - $2.80, OCTOBER'12 85 CALL - $6.05. I have close all contracts of OCTOBER'12 90 CALL - $2.80. Expences per unit to combination was reduced to $6.32.

[Options-trader 10]

The share is near $93. It is time to close the combination. I do it at bid price: OCTOBER'12 85 CALL - $9.05, OCTOBER'12 90 PUT - $1.56. Total profit is: (($9,05+$1,56)-$6,32)*46*100=$19,734 or 39.47%.