Option Strategy 1.1 - PSTH - Day 2 - Execution

Around 9:35 , I Executed the trade that I discussed yesterday :

 

At execution:

The total cost of this trade : $270 - commission

Break even stock price      : $22.70

Stock price                          : $26.75

Maximum Loss                  :$270.30  - on Dec 21 2021

Maximum Gain                  : $2000 - $270   =  $1,730 - ( rollover + sell commissions)

Risk / Reward                      : 270 / 1,730  =   0.156  (Using Risk/Reward, than profit / loss)

Option technical at execution 

Observations at execution :

 Trade Delta  :  0.97 - 0.44 = 0.53  (This means if there is change in $1 in underlying stock, option will change 0.53 per share, so $53 per contract , other Greeks being constant . This delta will shrink as the PSTH stock price approaches $40 ( sold DEC 17 21 call strike price). 

Margin Requirement : Ameritrade has a margin requirement for the trade - $720 ( this will be changing with P/L throughout the day.  

Open Interest : Dec 19 call has a high open interest so bid/ask spread is really low , Implied Volatility is high so this will work in our favor.

Assumption

Because of the Implied Volatility & open interest of the Dec option call (sold ones), Day to day P/L will vary on both option calls. In other words, Profit earned on one call vs loss earned on the other one won't respond to true delta. But in the end on Dec 21 2021 ,  option price will be  based on the current price of the stock and high implied volatility & Time value will be beneficial. Both are high because there is a optimism for the merger. 

Reading after market close  (At  4:01 pm EST)

Closing Stock Price   : $27.23

Delta                          : 52.40

P/L Day                     : $5

          P/L YTD                    : $5

          Margin Req                : $727.30

Daily Snapshot - Implied Volatility & Time Value (every 1 min)


 









Related links 

My Option Strategy

Day 1 - Plan

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