ISRG has been trending higher, broke-out today to new highs, and had a slight pop in implied volatility so this is a name I wanted to get into. I entered a credit spread position (sold put verticals) with the idea that this name will continue higher and also see a decrease in implied volatility.
The Position
ISRG Mar 12 Put Vertical 465/470
Delta: 470 Strike = 0.21
Credit: $0.85
Max Return on Risk (ROR): 20.48% [85/(500-85)]
Target ROR: 16.39%
Days to Expiration: 32
ISRG Price Chart
As seen above, ISRG has been trending higher and broke-out today. Volume has been increasing on break-out days and decreasing on times of consolidation, a positive sign. Implied volatility popped today, a plus for entering this trade today unless IV continues higher. RSI is at oversold levels, but as we all know, these levels tend to hold during times of strength. Ultimately, as long as ISRG holds above the $470 by March 12 expiration (3/17/12), this trade stands to see it’s max profit. However, I plan to take-off this trade as soon as my targets are hit.
ISRG Mar 12 Put Vertical Risk Profile
A +5% move would be great for this position while a -5% move by expiration would still see a profit by expiration. Undoubtedly, in the case of a -5% move, this position would already be adjusted. I plan on adjusting on a +10 delta move on the short put or taking profits at 80% of credit.
ISRG Mar 12 Statistics
Here are the statistics I follow for this trade. I am currently at a loss because of factors such as slippage and timing that occur when the trade is entered.
