Bragging math: $ 11,400 gain over negative cost of $ 0.30.
Since we cannot be generous by having cost zero, we cannot calculate the percentage gain by dividing by 0, thus for fun purposes, let's just say that the total cost is one penny.
manalagi, nice trade no matter how you slice it. but i am afraid i would assess your cost basis as being quite a bit higher than one penny. you are assuming the puts you wrote had a negative cost (the put premium), whereas in fact the real "cost" of the puts (for figuring out return on investment) is the amount of margin you tied up in writing them.
e.g., in a cash account account, you would have tied up nearly $100,000 selling those puts. if you held the puts and calls till expiration, and BIDU is at 130 at expiration, you would have cleared 10K from the calls, and $800 from the premium credit (put premium minus call premium), for a net profit of $10.8K before commissions. all this on 99.2K tied up when you sold the puts (the 100K margin requirement minus the premium credit). so your gain would have been 10.8K/99.2K = 10.89%, plus whatever interest you collected on the cash balance.
in a margin account, obviously the margin requirement on the short puts is well below 100%, but it still well above zero. so you could figure your gains accordingly.
in retrospect, when a stock has a huge one-day move like that, the greatest gains (i.e., the maximum amount of money that could be made using a given amount of starting money) come from having all one's money concentrated in out of the money calls. of course, it is easy to see in retrospect :) |
