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Let’s go into our trade tab, in the TOS platform. Go to “May.” I already have a current position on here, that I am doing for April. We’ll ignore those for now. There are only 4 days left on that.
We mentioned the 145 level on the upside. Let’s take a look at these. We may even want to go to the 150s, which would be this upper trend line here, if we can get a decent price for them. The picture looks good. Let’s take a look at this. We’re going to right click, and go to “Buy calendar.” Then, we’re going to go down to our lower strike, which was right around 132 or 130. If we can hit 130 at a decent price, let’s do 130.
We might even be able to get the 125s, which would give us even more downward protection. If we can hit 125, that would be okay too. Let’s try the 130s and see what the graph looks like. We’re going to right-click, and go to “Buy calendar.” Set the advanced order to “Blast all.”
Actually, we’re not buying these individually. We’re going to do a double calendar as one order. That’s the best way to do this. If you’re adjusting, you may want to do it differently. We want to submit this as a single order, double calendar.
We’re going to go to “Buy,” “Diagonal,” and “Double calendar.” We’re going to click on that, and this will bring up our strikes. We’re going to have to change these. We want the 150 calls, which are fine, but we want the 130 puts. We have to go down to the puts, and put in the 130s.
Now, we’ll double check this. We’re buying one of the Junes. We’re selling one of the Mays at 150. We’re buying one of the June 130s, and we’re selling one of the May 130s. This is for a 4.68 debit. Let’s go, right click. You can right click on this little blue thing here, but I’ve found it’s easier to click anywhere in this green area. Just right click on that, and we’re going to analyze this as a duplicate trade.
I have to eliminate my current position, so we’re going to have to hide positions down here. We’re going to take a look and see what this is going to look like, as a double calendar. It looks like we’re a little bit off center. We’ve got a big sag in the center, here. It looks like we’re going to have to tighten up our strikes, a little bit.
Let’s go with the 145 calls, and we’ll keep our 130 puts. That looks a little bit better, right in the center. We’ve got a couple hundred dollars of profit. We’ve got to change that. Now we’re going to be paying 5 a debit.
Whenever you have – right down here, if you see this little red lock, that means you’ve locked in. If you change any of the parameters, it’s going to lock in the debit that you’re paying. If you change any of these parameters – if you change the strike prices of any of these calls and puts – then you need to unlock this to get the current price on this double diagonal.
That looks a little better, doesn’t it? Let’s set our slices, so that we’re breakeven. We want them to breakeven on our Mays. All we had to do was set our slices to breakeven on the May 17. We want to set our probability date out to May, the expiration date. I think we’re good to go.
This looks pretty good. We’ve got our tent set up here. This is the graph that we want to see. This is exactly what we want to see. We want to have wide breakevens. The green line, again, is our expiration – the profit at expiration, or loss.
Our peaks are about 257 and 297, a little bit higher on the upside. Right now, we’re pretty close to the center of this tent. The price is not too bad. What I’m doing here now, is I’m taking a look at this 5 debit, which is the midpoint. If we can shave this down a little bit, you can see that we get into profit pretty quickly.
But you know what? Nobody gives you anything in the market. They just don’t give it to you. If we can hit our mid-price of 5, we’ll be considered extremely lucky, here.
What we want to do now is take a look at this. That looks pretty good. We’ve got 150 on the upside, as our breakeven. We’ve got 125, 126 on the downside. Let’s take a look at the graph, again. We’ve got 150 on the upside, which is good. That’s right where – if it does break through and follow this blue uptrend line, we’ll probably hit the top of it, right around 150. That’s what we want to do.
If we hit the bottom, and our breakeven at the bottom is about 126 – we’re right down in here, which is a pretty good level. It could go down lower than that, if we continue in this downtrend channel.
We’ve got a pretty wide range here. The EEM can move. It can go up pretty strong, one way or another. But we’ve got a pretty wide profit range here, which gives us a little bit more confidence.
What we want to do, now that we have these in position… We can play with this a little bit more. Let’s pull the puts up to the 135 level. What does that do to our breakeven? The breakeven now is just below 130.
We’re going to pay a little bit more for the debit. Remember, your maximum loss on a double calendar is the debit that you paid. $5.25 is our maximum loss on this. If you look at the prices here – we can set our slices to a different parameter – you can see that the margin required for the calendar is $523. That’s also our maximum loss.
Let’s take a look at this. We’re going to spread those out a little bit. Now, our breakeven to the downside – if you were slightly bullish, this would be a better play. The breakevens on the downside moved up to the 130 level, and the breakevens on the upside now are up around 151, or a little bit higher.
If you were slightly bullish on this, you might want to just play with those numbers a little bit. Bring those puts up closer to the strike price, and move those calls out a little bit. They are at 145. That gives us a higher breakeven on the upside.
Since it may appear that we’re still following that downtrend channel, we’re going to keep our puts at the 130 level, and our calls at the 145 level. I think that will work out for us pretty well, over here. We’re pretty much in the center. We could go down. We could go up. It doesn’t matter too much. We’ll still be in a profitable position.
Now, to order this – to put this position into the order queue -all you have to do is take a look at this, right click, and hit “confirm and send.” It’ll bring up the Order Confirmation dialogue box. What we’re doing, is we are putting in a double diagonal. This is a calendar spread.
We just want to make sure that everything is correct, here. 145s, 130s, 145, 130. We’re doing the double calendar. The cost of our trade is $498, and $6 in commissions, for a total cost of $504. That is also – if we take a look at this – $498 is our margin requirement, and it’s also our maximum loss on this trade.