Risky trade!!!

OK this trade is out of the ordinary for me and belongs in the speculative account. It is a credit spread that if speculation is correct will net a 75.44% return. This purely is a speculative play.

OEX Bear Call Spread May 595/600 for a credit of $2.00 to $2.15.

The OEX or S&P 100 has a very strong resistance at 595. There is some strength in the economy and earnings are roaring which would make you think that the markets should go up, but the better the earnings results and the better the economy is the more likely that the Fed will continue to raise interest rates which makes the market plummet. So this makes that 595 resistance point even stronger. A play here would be to sell the May 595 calls for around $4.25 and buy the May 600 calls for $2.10 creating a credit of $2.15.

Now for the good part of this trade, because you are creating such a large credit the amount of risk is actually lower. Instead of the capital risks that I normally have of $4.00 to 4.50, the capital risk of this trade is only $2.85 per contract. So the play is riskier or more speculative but the capital risk is less. Another reason that I like credit spreads as I am more risky in my plays the capital risk goes down!

So here is a chance to make a 75% gain but only lose 2.85 per contract at the most if I am wrong in 22 days.

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