· New break-even: $31.3 (10.57% lower than your cost) · No additional cash outlay or downside risk!
· You purchase 1 call for every 100 shares of stock owned, and sell twice as many calls at the higher strike price.
· Buy at the Ask: MSQJB.X (29.00-strike ITM call) for $2.49 · Sell at the Bid (twice as many as you bought): MSQJF.X (30.00-strike OTM call) for $1.95 · Net Credit: + $1.41 (2 * 1.95) = 3.9 - 2.49 = 1.41
NOTES: 1. This type of recovery position is most effective established with options that expire about 6 months out. 2. Since you establish this position as a net credit (or for no cost), it does not involve investing more cash. 3. The Ratio Call Spread decreases the risk of the position, and helps you get back to "break-even" or maybe better. 4. This recovery strategy works best with stock that has decreased 25% or less. 5. It's best to establish your position after a market rally (the market goes up).
Check back here often to monitor possible positions as the markets change.
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Options involve risk and are not suitable for all investors. This is an informational tool only. It is not intended for trading purposes, and is not a recommendation or suggestion to buy or sell securities. Be smart, trade with caution, and consult with a broker and various sources before doing so.
