Option Trading Mathematics (how to read?)
We entered an Index Option position today.
1175/1200 - 1375/1400 x2
Max option trading reward : $456 if 1200 - 1375 (83.41%)
option trading risk : -$1250 if below 11200 (3.28%) or -$1836 if above 1375 (13.12%)
Max option trading risk : -$4540 if below 1200 or above 1400 (7.67%)
Expected Value: $98.41
Option Trading Thoughts
The position is more conservative because our Sep option contract is still under pressure on the call side.
The maximum option trading risk we want to take on is $1985 and we are fairly close to that on the call side at $1836. So, only about half of the buying power available was utilized because of this and the additional fact that the volatility is pretty low. With the passing of time the potential loss of $1836 will decrease and hopefully volatility will pick up as well. Then we will use up the rest of the buying power for Oct.
