Date: 4/27/23 12:55 pm
Master Portfolio Contracts: 10
Notes: We are closing out of our credit spread.
If there’s any proof that the market is irrational, CAT is the perfect example today. They beat earnings by over a dollar, guidance was lower, and the market sold it off by over $9 at the open. At the time we are typing this update it is down $5. The three of us have been debating whether to just close it and move on but that is a very large loss, close to $9000 for most of us. We have a core position available to work against. Cat has good premiums. We decided that it’s better to adjust and at least try to work the loss down to a much lower level.
This is going to be a three part trade but we are breaking it down into separate alerts. We are first going to close the cat call spread which we made about $1000 on. Step two we will roll the existing short put which may require very little credit to a slight debit. Right now, the market is showing about 5 cent debit to a 5 cent credit. We will then add another leg to the core trade at the 210 level as it seems to have found support there and has been a long-term support level. And then to bring in additional cash we will sell another call credit spread up above the market just to bring in another $1000. Total we will be putting out a debit for this of around 2.50, but at least gives us a chance to try to recover the trade.
BTC the CAT 28 APR 225 call
STC the CAT 28 APR 230 call
Debit of around 0.05 to close the position
Position After Trade Detail:
-10 CAT 28-APR 235 put
+10 CAT 16-JUN 230 put