This week’s closed trade of the week was our Bear Put Debit spread on Santos Limited. This trade was initially opened on 9th December, due to changing trend conditions that signalled potential for further downside in STO’s stock price.
We entered this trade on 9t December by buying the Jan 14.50 Puts and selling the Jan 14.00 Puts for a combination spread price of 20.5c per share debit. As a debit spread, our risk was capped at the premium paid, while our upside was capped at 29.5c max gross profit.
After entry, the stock varied between supports around $13.80 and resistance levels near 14.50, mostly adhering to the outlook on the trade. Coming into options expiration this week, we were able to close the trade at 46c, locking in 25.5c gross profit (+124.4%) whilst removing the risk of STO rebounding back higher again prior to options expiry.
For our Level 1 Traders (smallest risk traders), this trade equated to a gross $357 profit on the initial capital outlay of only $287.