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Paramount Gold Nevada Corp. Message Board

  • fatherpatrick_99 fatherpatrick_99 Aug 11, 2012 12:06 PM Flag

    Busy Options Friday

    Anyone care to guess why ??

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    • Bear put-call spread was played by someone friday.

      Someone sold 3735 Sept. $2.50 contracts. The calls closed @25 cents and given the intraday trading range the call seller neted about $80k from the sale.

      They simultaneously used the $80k proceeds to buy 1686 Sept. $7.50 put contracts. (These closed at $5.10 so the money taken in from selling the calls matches the money spent on the puts)

      This is a bearish play:

      Imagine that PZG is $3 at Sept exp. The seller of the calls will lose 25 cents per share after taking the premium recieved from selling the call into account. (loss of $80k)

      The $7.50 puts that closed @ $5.10 friday will also then only be worth $4.50 for a loss of 60 cents per share, or a loss of $100k on the 1686 contracts.

      Total loss of $180k if PZG is $3 in Sept.

      On the other hand, if PZG is $1.50 @ Sept exp then the calls simply expire worthless and the puts (bought at $5.10 with the proceeds from selling the calls) are worth $6 for a profit of 90 cents per share, or a profit of $152k on the 1686 put contracts.

      This is a bear play>>> option player loses $180k if PZG is $3 at Sept exp BUT makes $152k if PZG is $1.50

      BEAR put - call spread

2.09-0.05(-2.34%)Jul 28 4:00 PMEDT