The Collar Put Ratio starring Facebook

One of the Option strategies I utilize for protecting a position short-term is the Collar Put Ratio (CPR). Here is what a CPR looks like using the Fab 5 position ($100 Roll) for $FB as an example:

I am long stock at $90.33 (since 7/16)

Here is the CPR:

I am short the August 07 weekly $95 Calls
I am long the August 07 weekly 95/87.5 1×2 Put Ratio (for every 1 contract that I am long the $95 Put I am short 2 $87.5 Puts). This takes margin

So let’s look at a Daily chart to see how this trade looks post-Earnings:

FB_G

The black horizontal line represents the $95 level which is key for the Option portion of my trade. The long $95 Puts are ITM (in the money) so the long stock is protected well so far.

– DM 9:30 AM CST