We are back with more good news from our CROX trade. Last week we saw that a pullback in the stock had put us in a negative open profit and loss position. This pullback allowed us to pivot to a time decay strategy while still allowing the trade to come back to us if the stock reversed. This is why we use the diagonal trade. Even though we had a negative open P/L we had a positive closed P/L as we had rolled our original call up and took an over $1700 profit off the table.

This is the trade that just won’t quit and that’s why it is one of my favorite strategies. Fast forward to this week and the trading gods have smiled on us once again. Just when things were looking rough they did what we thought they might do when we started with this trade. They reversed off the bottom of our very well established channel and proceeded back to the top side of the channel which has greatly diminished our negative open P/L as well as given us 5 more days of theta collection. As you will see in this week’s video we are not quite in the black again but we are trending in the right direction. CROX gave us a nice pop in early trade this morning that almost brought back to even but unfortunately it didn’t hold up through the day.

We are not discouraged by this as we still have 2 months in which to collect time decay and wait to see if we get another break out above the top of the channel. Also even it doesn’t break the top of the channel as you can see the top of the channel is still rising and could possibly provide more rolls just by floating up for the next couple of months. The key here is that there is lots more upside to this trade and the overall risk is fixed as the most we can lose if the stock plummets is what we paid for the long call minus any credits we collect.

Take a gander at this week’s video as we look at the amount of credit we can collect over the next couple of months to see what our worst-case scenario might be in this trade. If we are happy with the worst-case scenario then we are going to be ecstatic with the best-case scenario.

Trade Well,

Coach “Old Money” Holmes