If you agree that CRM will stay above the 50-day moving average (blue line in chart), consider the following trade that relies on the stock remaining above 250 (red line in chart) through expiration in six weeks. Buy to Open CRM 29Oct 245 put (CRM211029P245) Sell to Open CRM 29Oct 250 put (CRM211029P250) for a credit of $1.10 (selling a vertical) This credit is $0.02 less than the mid-point of the option spread when CRM was trading at $260. Unless the stock rallies quickly from here, you should be able to get close to this amount. Your commission on this trade will be only $1.30 per spread. Each spread would then yield $108.70. This trade reduces your buying power by $500 and makes your net investment $391.30 ($500 – $108.70). If CRM closes above $250 on October 29, both options will expire worthless and your return on the spread would be 27% ($108.70 / $391.30).
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry |