Wednesday, 16 January 2008

Taking a punt by covering my DAX puts

Last Wednesday, I sold a 7500 March call on the DAX and bought a 7000 March put in about 7 times the size, for about zero premium.

Falling a half-decent fall over the last week, I'm covering this position. Whilst I still see significant downside for the German stock market, I want to try and maximise profits by actively trading it around. Plus basically, I'm pretty greedy and find it hard to not book profits!

On the put - I'd paid 76.3 in equivalent of about $135/point, I'm selling it today for 108.7 for a profit of just under $4,400.

On the call - I'd sold at 517.6 in just under $20/point, today I'm buying that back at 305.2, for a profit of about $4,150.

Whilst there is a lot of fear out there, I want to remain level-headed and continue to buy the dips, and set shorts on strength. Nothing goes down in a straight-line, so hopefully this strategy will pay off. Will continue to use these leveraged option trades, where I have a large potential payoff whilst having smaller exposure if it goes against me.


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