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Thursday, January 3, 2008

The Challenge Account: Sugar #11 Profit Stop

Public Challenge Account:

Currently Long one March 08 Sugar #11 10.00 Put at .08 ($89.60) in optionsXpress Account
Profit goal for the option is the .21 to .25 area ($235.20 to $280)

Value of option at the time of this writing: .08 ($89.60)

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Ok, my average time in an options play, one way or another is 11 days. So in the optionsXpress account I went ahead and placed what we call a 'profit stop' on Sugar #11 to sell the 10 Put at .21 limit on a GTC order, or "Good Till Cancelled". In plain language, this means that the order states that at .21, to sell the option back to the market, at .21 ($235.20) or a better price, but no lower. This order will remain active until it's cancelled. We often call such an order a "Profit stop". In other words, the order that will cause us to exit the markets with a profit.

Without the value of the option, this account stands at $465.14. On the 23rd of January, the $100.00 will be deposited, which will cause the balance, not counting our option value, to be worth $564.14. Just a little over $3.00 less than where we started out before our option purchase. About two weeks after that, another $100 will be inbound to our optionsXpress account, causing our balance to be approximately $664.14 - not counting whatever we gain from our option trade.

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This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment advisor, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders

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