free option strategy

Long Collar – Free Trade Idea

Every Friday we give you a free options trade idea identified by Option Party. Today, we’re focusing on the long collar.

OPPORTUNITY

There is an attractive long collar trade in UNITED STATES STEEL (X). Currently it is trading for $22.73.

CHARACTERISTICS

There is a 61.4% chance the stock will close above 21.00 on 08-18-2017, and you will earn your target return of $249.95. There is a 65.5% chance the stock will close above 20.36 on 08-18-2017, and you will earn a profit. There is a 26.5% chance the stock will close below 19.00 on 08-18-2017, and you will have a total loss of $555.05.

SPECIAL CHARACTERISTICS

For a Long Collar, the amount you risk is different than the amount of capital required. This is because you cannot lose all the capital invested in the position (this is a good thing). This long collar will require $8,145.10 and returns 3.1% on the capital invested.

ENTRY PLAN

This is a three legged strategy. To enter this position you will sell 4 call options expiring on 08-18-2017 with a 21.00 strike price, buy 4 put options expiring on 08-18-2017 with a 19.00 strike price and buy 400 shares of stock for 22.73. This will require a net debit of $20.33. The commission for this trade will be $15.10.

DISCLAIMER

All information presented here is current as of June, 30 2017 10:47 pm (EST). All trading involves risk. Free trades ideas are presented for illustrative purposes only and are not to be construed as financial advice.


How Did We Do? The Results…

This trade employed a Long Collar strategy that needed X to close above $21.00 on August 18, 2017 to earn the targeted return. X closed at $23.70 which resulted in a return of $249.95.