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Events Trader #21: Time to take some quick profits on our FTSE 100 put options
I know it's not the usual day for Events Trader, but I wanted to issue a quick update on one of the trades we put on earlier this week.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
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On Tuesday I suggested buying put options on the FTSE and Vodafone, as I thought the market looked overbought and was ripe for a correction.
This correction has come a lot faster then I was expecting. As a result, we already have a decent profit on the FTSE 5,100 November 2009 Put which we bought earlier this week for £1.40. The option is currently trading at £2.25 around a 60% gain.
This week's events could mark the start of a period of increased volatility. And maybe the market will fall a bit more. At the same time, I can't discount the possibility that maybe on Monday or Tuesday we could have a technical bounce.
So I think it's worth to take our profits on the FTSE option, and we'll leave the Vodafone one running.
Recommendation:
SELL FTSE 5,100 November 2009 put options
I will be back on Tuesday with a full edition of Events Trader.
Riccardo Marzi
Events Trader
Your capital is at risk when you invest in shares, never risk more than you can afford to lose. The share recommended is denominated in a currency other than sterling. The return from such shares may increase or decrease as a result of currency fluctuations. The value of your investment can go down as well as up. Your profit depends on the potential price increase of the underlying security. The potential loss is predetermined and limited to the premium amount paid, and can be as much as 100% of the premium initially paid for the put. Please seek independent personal advice if necessary.
Figures are calculated using the closing mid-prices on the date on which shares are first recommended. All gains are gross, and returns will be affected by dividend payments, dealing costs and taxes. Past performance and forecasts are not reliable indicators of future results.
Profits from share dealing are a form of income and subject to taxation. Tax treatment depends on individual circumstances and may be subject to change in the future. Editors or contributors may have an interest in shares recommended.
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