Covered Write for the Downside (Long Diagonal)

With SPX at  2398

Buy 1  Jun 16  2430 Put    Sell 1  Jun 2  2400 Put.    27.60 Debit

Greeks:  Deltas  -15,  Gamma  -.29,  Theta 5, Vega  32,  Margin or Risk  $2760

5 Step Trade Plan:

#1   Why am I doing this? Market near All time highs and hedging IRA or individual trades to the downside.

#2   Set up:  I am Buying my Long Put Option in SPX about 30 points in-the-money and selling my Short Put option about at-the-money. I have no risk on the downside.

#3   Risk Management:   Profit Target about 7-10% of initial debit. Max Loss is about 10% of initial Debit.

#4  When to Adjust on Upside?  If SPX hits 2410-2415 area

#5  How to Adjust on Upside?  Buy 1 2400 P  and Sell 1 2410 P (Put Vertical). If SPX continue up, Buy 2410 P and Sell 2420 P. (All Adjustments in the June 2 Expiration).

Dan Sheridan

options trading courses

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