2nd Update Nov 23, 2011 at 10:55am: With MS and BAC both down about 30% from their Oct highs and not far from their early Oct lows, I want to manage these positions. Back in mid Oct I came out of the ratios of the downside puts that I originally sold against the Jan Puts that I was long…..now I want to cover the MS (stock ref 13.05) Jan 5 put at .15 and sell the Jan 8 Put at .40…..As for BAC (stock ref 5.19) I want to cover the Jan 2.5 Put for .06 and sell the Jan 4 Put at .20
Rationale here is that the stocks are getting very oversold and I want to cover some way downside puts that don’t have a strong likelihood of being in the money and capture some more gains from the position in the event of a rally.
SO my new Structures look like this:
MS long Jan12 10/7 Put Spread locking in .23 profit from the original Jan12 5 strike put sale, and now locking in another .40 from the Jan12 8 strike Put sale
BAC long Jan12 5/4 Put Spread. locking in .22 gain in BAC from original 2.5 strike put sale, and now locking in another .20 from the Jan12 4 strike Put Sales.
Original Post Oct 12th 2011: MS and BAC Trade Management
Quick Update on BAC and MS, covering one of the puts that I am short in both structures. Leaving a 1×1 Put Spread on at this point.
MS covered one of the 2 Jan 5 puts for .22, was short it at .38 (original trade here)
BAC covered one of the 2 Jan 2.5 puts for .12, was short it at .28 (original trade here)
This reduces the cost basis of the spread and if the stocks were to sell off again would likely turn it into a 1×2 again.