We hold the August 175-170 put spread twice for a 0.05 debit — and now two August 175 calls acquired yesterday for 1.60. They are of little concern, however, since our put spread will only increase in value if a weak IBM causes the calls to fall. For now, offer the put spreads to close for 4.00 with 0.20 of discretion. For the order to fill, the August 170-175 call spread would have to be trading for around 1.00. (Note: If you can buy the call spread at that price, I’d suggest doing so instead of trying to close out the puts. This would effectively leave us with no position in the August 175 calls, but it won’t be terribly risky to leave short 170s uncovered for a short while. In any event, if there are changes to be made, I’ll signal via an intraday alert.) _______ UPDATE (4:04 p.m. EDT): Until I’ve heard from a few subscribers, I’ll tentatively record an opening purchase of two August 170-175 call spreads for 1.00. This shouldn’t have been too difficult, since the spread was do-able for as little as 0.87 when the calls were hitting bottom. Since we were long two August 175 calls in addition to the puts, we are now long two puts spreads (for a 0.05 debit) and long two August 170 calls. This will allow us to short two August 175 calls without risk, and whatever we receive as premium will be “gravy” on top of the $790 profit we have effectively “locked in” on the put spreads. Accordingly, and assuming your position matches the one I’ve detailed, you should short two September 175 calls at will. They are currently trading for around 1.75.
