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Think the tech rally may be ahead of itself? Consider a bearish-to-neutral vertical spread strategy
The Nasdaq-100 Index (NDX) has led the market’s steady rally, and the contrarian may argue that it will lead us lower as well. The NDX itself has rallied 70%, and some may think it is a bit overdone at this point – this bear call spread is for investors who believe this to be the case. This spread also has limited risk and may allow the trader to collect theta if we begin to move sideways here. Remember this is a cash-settled index, which means you cannot be short the index itself; the options will settle into a cash position.
NDX Credit Spread Trade Details:
The NDX is currently trading at $1,671.82.
Credit Spread/Bear Call Spread–
Profit/Loss Details:
Maximum Profit: $5.90 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.
Maximum Risk: $19.10 (the difference between strikes minus the credit collected).
Breakeven: $1,730.90 (the strike of the lower call plus the premium).
Remember, trading Ideas are generated by the ONN Idea Generating Platform as a starting point for people to begin their own research. Trading ideas are not intended as trading or investment advice or recommendations that any particular security or strategy may be suitable for any specific person. You are solely responsible for your investment decisions, but we hope that some of these ideas will give you a starting point as you look for strategies to employ.
Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.
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What price would the stock have to rise to or drop to for you to admit you’re wrong and put off your trade?
Enter price you think the stock will move to. You can be bullish or bearish.
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