BULL SPREAD EXAMPLE#1: Wall Street 30
Posted by BOOGIE145 on Wednesday, May 15, 2013 Under: 848FINACE
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Tags: bull spread example#1: wall street 30
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Profit warnings from a number of key companies have depressed the stock market.
The CME® E-mini Dow® Future is the basis for our Wall Street 30 contracts, and for this example is trading around 11790.
You think sentiment will deteriorate further during the trading day, as investors digest the implications of the profit warnings
You think sentiment will deteriorate further during the trading day, as investors digest the implications of the profit warnings.
You choose:
Wall St 30 (MAR) 11700-12100 (4:15PM)
You Sell as you think the index will be below 11791 at 4:15pm.
You select 8 contracts at the bid price of 11791. Each point that the price moves is worth
$1 per contract.
Your trade's floor andceiling is 11700 and 12100respectively.
The most you can make is $728;
the most you can lose is $2472*.
Your position will expire at 4.15pm.
The difference between Nadex's calculated expiration value and your opening price of 11791 will determine your profit or loss.
At 4:15pm, Nadex's calculated expiration value for Wall St 30 is down at 11728.
The difference between your opening price (11791) and the expiration value (11728) is63 points.
Multiply 63 by the number of contracts (8) and the contract value per point ($1) to calculate your gross profit.
63 x 8 x $1 = $504*
*Fees apply
At 4:15pm, Nadex’s calculated expiration value for Wall St 30 is up at 11973.
The difference between your opening price (11791) and the expiration value (11973) is 182points.
Multiply 182 by the number of contracts (8) and the contract value per point ($1) to calculate your gross loss.
182 x 8 x $1 = $1456*
*Fees apply
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