One can buy insurance or sell insurance on stocks through the Options Markets.
If you wish to purchase insurance (protective puts) here are a few to consider before purchasing.
How volatile is the stock?
Will a stop loss be sufficient protection or do I need to purchase insurance?
Am I buying insurance while it is inexpensive ($VIX is low) and selling it when it becomes expensive ($VIX is high).
How much does the premium cost?
Do I need complete stock protection down to zero. If so, then just buy puts on the stock outright.
Do you simply need partial protection? If so, then place a lower cost bear put spread against the stock position.
A new trade idea for the week is as follows:
China Mobile ADR (CHL)
Buying the Stock with Partial Insurance
Contingent upon stock breaking above 50.05/share
Buy both the stock and Bear-Put Spread
For every 100 shares of stock
Buy to open 1 of the Dec 50 strike puts
Sell to open 1 of the Dec 45 strike puts
Limit debit = 51.55
Sunday, November 22, 2009
Tuesday, November 17, 2009
Agriculture is going higher!
We have previously traded this sector with great success (POT, MOS and others). We will go back to the Well once again. The elevator is going up to the top floor or close to it.
Buy: DBA (Agriculure ETF) tracks the price of corn, wheat, soy and other soft commodities.
Limit price:26.30
Stop loss: 25.64
GTC (good til canceled) 
Monday, November 16, 2009
New Trade Idea
MercadoLibre (MELI)
Stock Trade
Buy the stock with a stop-limit 0rder
Stop = 46.07, Limit = 46.22
Place a sell stop below at 43.88
Stock Trade
Buy the stock with a stop-limit 0rder
Stop = 46.07, Limit = 46.22
Place a sell stop below at 43.88
Economics 101
The stock market is a forward-looking mechanism. Unfortunately, many investors time their entry into and out of the markets at completely the wrong time.
Many investors are surprised that stock prices hit their lows in March of this year while the economy was in shambles and in the heart of the recession; stocks rebounded nicely since March, but the economy continued to falter. It should not really be a surprise at all that the stock market rose while the economy suffered.
Stocks are a leading indicator and are consistently around six months ahead of the current economic condition. A great example of this was back in late (December) 2007 when stock prices began to decline. This was a full six months before the economic recession actually arrived. Everything seemed just fine at the time; however, in reality, late 2007 was the ideal time to be selling your stock positions and possibly begin shorting if you wanted to be more aggressive. This would have kept you out of stocks during the stock market crash of 2008!
The signs were not purely economic as there were also fundamental factors such as the bank credit crisis and declining earnings. There were also technical indicators such as a death cross in the moving averages that foretold the pending doom.
The point is: In trading, you need to understand economics first, worry less about today and more about what is just around the corner! If the economy stabilizes and everything is great and that is when you finally begin to buy stocks, then you have it all backwards. Buy when others are fearful and sell when others are greedy! This one principle helped me to pay off my first home in less than 4 years.
I have posted some of the important economic conditions to watch out for, keep in mind its not where we are today but where we are headed. This principle is why I have bought more precious metal (Gold and Silver) and commodity (Oil and Agricultural) stocks in the past few months than I have ever done previously in my life. Those assets will rise sharply in an inflationary environment and although inflation is not a problem today, it will be soon enough!
Recession
In economics, a recession is a general slowdown in economic activity over a long period of time, or a business cycle contraction. During recessions, many macroeconomic indicators vary in a similar way.
Fall: Production as measured by GDP (Gross Domestic Product), employment, investment spending, capacity utilization, household incomes, business profits and inflation.
Rise: Bankruptcies and the unemployment rate.Governments usually respond to recessions by adopting expansionary macroeconomic policies.
E.g., increase money supply, increase government spending and decrease taxation
Depression
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen as part of a normal business cycle. Considered a rare and extreme form of recession. Characterized by its length, and by abnormal increases in unemployment, falls in the availability of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuation (mostly devaluations) Price deflation, financial crisis and bank failures are also common elements of a depression
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy
A chief measure of price inflation is the inflation rate. The annualized percentage change in a general price index (normally the Consumer Price Index, or CPI) over time
Stagnation
Economic stagnation, often called simply stagnation, is a prolonged period of slow economic growth. Traditionally measured in terms of the GDP growth. The definition of “slow” Under some definitions, “slow” means significantly slower than potential growth as estimated by experts in macroeconomics. Under other definitions, growth less than 2-3% per year is a sign of stagnation. The term bears negative connotations, but slow economic growth is not always the fault of economic policymakers. E.g., potential growth may be slowed down by catastrophic or demographic reasons
Stagflation
Stagflation is an economic situation in which both inflation and economic stagnation occur simultaneously and remain unchecked for a significant period of time.Economists offer two principal explanations for why stagflation occurs.First, stagflation can result when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable.This type of stagflation presents a policy dilemma because most actions to assist with fighting inflation worsen economic stagnation and vice versa.Second, both stagnation and inflation can result from inappropriate macroeconomic policies.E.g., central banks can cause inflation by permitting excessive growth of the money supply, and the government can cause stagnation by excessive regulation of goods markets and labor markets. Together, these factors can cause stagflation.
Many investors are surprised that stock prices hit their lows in March of this year while the economy was in shambles and in the heart of the recession; stocks rebounded nicely since March, but the economy continued to falter. It should not really be a surprise at all that the stock market rose while the economy suffered.
Stocks are a leading indicator and are consistently around six months ahead of the current economic condition. A great example of this was back in late (December) 2007 when stock prices began to decline. This was a full six months before the economic recession actually arrived. Everything seemed just fine at the time; however, in reality, late 2007 was the ideal time to be selling your stock positions and possibly begin shorting if you wanted to be more aggressive. This would have kept you out of stocks during the stock market crash of 2008!
The signs were not purely economic as there were also fundamental factors such as the bank credit crisis and declining earnings. There were also technical indicators such as a death cross in the moving averages that foretold the pending doom.
The point is: In trading, you need to understand economics first, worry less about today and more about what is just around the corner! If the economy stabilizes and everything is great and that is when you finally begin to buy stocks, then you have it all backwards. Buy when others are fearful and sell when others are greedy! This one principle helped me to pay off my first home in less than 4 years.
I have posted some of the important economic conditions to watch out for, keep in mind its not where we are today but where we are headed. This principle is why I have bought more precious metal (Gold and Silver) and commodity (Oil and Agricultural) stocks in the past few months than I have ever done previously in my life. Those assets will rise sharply in an inflationary environment and although inflation is not a problem today, it will be soon enough!
Recession
In economics, a recession is a general slowdown in economic activity over a long period of time, or a business cycle contraction. During recessions, many macroeconomic indicators vary in a similar way.
Fall: Production as measured by GDP (Gross Domestic Product), employment, investment spending, capacity utilization, household incomes, business profits and inflation.
Rise: Bankruptcies and the unemployment rate.Governments usually respond to recessions by adopting expansionary macroeconomic policies.
E.g., increase money supply, increase government spending and decrease taxation
Depression
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen as part of a normal business cycle. Considered a rare and extreme form of recession. Characterized by its length, and by abnormal increases in unemployment, falls in the availability of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuation (mostly devaluations) Price deflation, financial crisis and bank failures are also common elements of a depression
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy
A chief measure of price inflation is the inflation rate. The annualized percentage change in a general price index (normally the Consumer Price Index, or CPI) over time
Stagnation
Economic stagnation, often called simply stagnation, is a prolonged period of slow economic growth. Traditionally measured in terms of the GDP growth. The definition of “slow” Under some definitions, “slow” means significantly slower than potential growth as estimated by experts in macroeconomics. Under other definitions, growth less than 2-3% per year is a sign of stagnation. The term bears negative connotations, but slow economic growth is not always the fault of economic policymakers. E.g., potential growth may be slowed down by catastrophic or demographic reasons
Stagflation
Stagflation is an economic situation in which both inflation and economic stagnation occur simultaneously and remain unchecked for a significant period of time.Economists offer two principal explanations for why stagflation occurs.First, stagflation can result when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable.This type of stagflation presents a policy dilemma because most actions to assist with fighting inflation worsen economic stagnation and vice versa.Second, both stagnation and inflation can result from inappropriate macroeconomic policies.E.g., central banks can cause inflation by permitting excessive growth of the money supply, and the government can cause stagnation by excessive regulation of goods markets and labor markets. Together, these factors can cause stagflation.
Sunday, November 8, 2009
Stock or Option Arbitrage Trading
The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies. It provides a mechanism to ensure that prices do not deviate substantially from fair value for long periods of time.
Given the advancement in technology, it has become extremely difficult to profit from mispricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly and the opportunity is often eliminated in a matter of seconds.
Let's look at an example of how a successful merger arbitrage deal works in practice:
Suppose ABC Company is trading at $40 per share when XYZ Company comes along and bids $50 per share – a 25% premium. The stock of ABC will immediately jump, but will likely soon settle at some price higher than $40 and less than $50 until the takeover deal is legally approved and closed. However, if ABC trades at a higher price than $50, then the market is betting that a higher bid will emerge.
Scenario #1
Let's say that the deal is expected to close at $50 and ABC stock is currently trading at $47. Seizing the price-gap opportunity, a risk arbitrageur would purchase ABC at $47, hold on to the shares and eventually sell them for the agreed $50 per share acquisition price once the merger is closed. From that part of the deal, the arbitrageur pockets a profit of $3 per share, or a 6% gain, less trading fees.
From the time that they are announced, mergers and acquisitions take about four months to complete. The 6% gain would translate into an 18% annualized return
Scenario #2
Another possible scenario would be for the arbitrageur to simultaneously do Scenario #1 AND also short sell XYZ stock in anticipation that its share price will fall in value. Of course, the value of XYZ may not change. However, often an acquirer's stock does fall in value. If XYZ shares do fall in price from $100 to $95, for example, the short sale would net the arbitrageur an additional $5 per share, or 5%
From the time that they are announced, mergers and acquisitions take about four months to complete. The 6% gain from target's stock and the 5% gain from the acquirer's stock together would translate into an impressive annualized return of 33% (less transaction costs) for the arbitrager
Merger Arbitrage Trade:
Berkshire Hathaway (BRK) announced that it is paying $100 per share to acquire railroad firm Burlington Northern Santa Fe (BNI). Berkshire will also take on $10 billion of Burlington Northern debt, valuing the total deal at $44 billion
The company said the deal is its biggest acquisition ever. “Our country's future prosperity depends on its having an efficient and well-maintained rail system. Conversely, America must grow and prosper for railroads to do well,” Warren Buffett said in a press release. Mr. Buffett added, “Most important of all, however, it’s an all-in wager on the economic future of the United States. I love these bets.”
Option Arbitrage Trade Details (Bull Call Spread)
Buy the April 90 strike calls
Sell the April 100 strike calls
Net debit = 8.00 or $800 risk and cost of trade
Max reward = 2.00 or $200 per contract
ROI = 25% in four months
A 75% annualized return
Given the advancement in technology, it has become extremely difficult to profit from mispricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly and the opportunity is often eliminated in a matter of seconds.
Let's look at an example of how a successful merger arbitrage deal works in practice:
Suppose ABC Company is trading at $40 per share when XYZ Company comes along and bids $50 per share – a 25% premium. The stock of ABC will immediately jump, but will likely soon settle at some price higher than $40 and less than $50 until the takeover deal is legally approved and closed. However, if ABC trades at a higher price than $50, then the market is betting that a higher bid will emerge.
Scenario #1
Let's say that the deal is expected to close at $50 and ABC stock is currently trading at $47. Seizing the price-gap opportunity, a risk arbitrageur would purchase ABC at $47, hold on to the shares and eventually sell them for the agreed $50 per share acquisition price once the merger is closed. From that part of the deal, the arbitrageur pockets a profit of $3 per share, or a 6% gain, less trading fees.
From the time that they are announced, mergers and acquisitions take about four months to complete. The 6% gain would translate into an 18% annualized return
Scenario #2
Another possible scenario would be for the arbitrageur to simultaneously do Scenario #1 AND also short sell XYZ stock in anticipation that its share price will fall in value. Of course, the value of XYZ may not change. However, often an acquirer's stock does fall in value. If XYZ shares do fall in price from $100 to $95, for example, the short sale would net the arbitrageur an additional $5 per share, or 5%
From the time that they are announced, mergers and acquisitions take about four months to complete. The 6% gain from target's stock and the 5% gain from the acquirer's stock together would translate into an impressive annualized return of 33% (less transaction costs) for the arbitrager
Merger Arbitrage Trade:
Berkshire Hathaway (BRK) announced that it is paying $100 per share to acquire railroad firm Burlington Northern Santa Fe (BNI). Berkshire will also take on $10 billion of Burlington Northern debt, valuing the total deal at $44 billion
The company said the deal is its biggest acquisition ever. “Our country's future prosperity depends on its having an efficient and well-maintained rail system. Conversely, America must grow and prosper for railroads to do well,” Warren Buffett said in a press release. Mr. Buffett added, “Most important of all, however, it’s an all-in wager on the economic future of the United States. I love these bets.”
Option Arbitrage Trade Details (Bull Call Spread)
Buy the April 90 strike calls
Sell the April 100 strike calls
Net debit = 8.00 or $800 risk and cost of trade
Max reward = 2.00 or $200 per contract
ROI = 25% in four months
A 75% annualized return
Friday, November 6, 2009
Sell Short Commercial ETF (IYR)
New Trade Idea
We typically try to avoid entering new trades on Fridays. There tends to be choppy trading leading into the weekend. However, this is a trade that we feel can be entered if it meets our entry criteria tomorrow. We still run the risk of having it chop around and stop us out prematurely.
The thesis is part fundamental and part technical. Fundamentally, commercial real estate is in very rough shape. Technically, it has broken below support and is now re-testing it from below. This could be a nice entry opportunity to get short if we roll over. We are keeping a very tight stop loss which means low risk, but also increased risk of being stopped out early. The trade is as follows:
Commercial Real Estate ETF (IYR)
Sell Short: IYR
Stop Limit order:
Stop price: 40.91
Limit price: 40.83
If triggered into the trade, then place your buy stop order above at 41.61.
We typically try to avoid entering new trades on Fridays. There tends to be choppy trading leading into the weekend. However, this is a trade that we feel can be entered if it meets our entry criteria tomorrow. We still run the risk of having it chop around and stop us out prematurely.
The thesis is part fundamental and part technical. Fundamentally, commercial real estate is in very rough shape. Technically, it has broken below support and is now re-testing it from below. This could be a nice entry opportunity to get short if we roll over. We are keeping a very tight stop loss which means low risk, but also increased risk of being stopped out early. The trade is as follows:
Commercial Real Estate ETF (IYR)
Sell Short: IYR
Stop Limit order:
Stop price: 40.91
Limit price: 40.83
If triggered into the trade, then place your buy stop order above at 41.61.
Thursday, November 5, 2009
Ultra and Ultrashort ETF's
Ultra and UltraShort ETFs
Get more exposure for your investment dollars. Leveraged and inverse funds, designed to pursue a multiple, or inverse multiple, of an index or benchmark on a daily basis, have grown in number and popularity in recent years. Utilize leveraged investment techniques that magnify gains and losses and result in greater volatility in value.
Each Ultra or UltraShort seeks a return that is a multiple or inverse multiple (e.g., -200%) of the return of an index or other benchmark (target) for a single day. Due to the compounding of daily returns, returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period.
Ultra ETFs:
More leverage in the Ultra ETFs. Buying an Ultra ETF is somewhat similar to buying a call option
UltraShort ETFs:
More leverage in the UltraShort ETFs. Buying an UltraShort ETF is somewhat similar to buying a put option since they have an inverse relationship to the underlying component.
Ultralong ETF's:
UYM ULTRA BASIC MATERIALS
UGE ULTRA CONSUMER GOODS
UCC ULTRA CONSUMER SERVICES
DDM ULTRA DOW 30
UYG ULTRA FINANCIALS
RXL ULTRA HEALTH CARE
UXI ULTRA INDUSTRIALS
MVV ULTRA MIDCAP
DIG ULTRA OIL & GAS
QLD ULTRA QQQQ
URE ULTRA REAL ESTATE
UWM ULTRA RUSSELL 2000
SSO ULTRA S&P 500
USD ULTRA SEMICONDUCTORS
ROM ULTRA TECHNOLOGY
UPW ULTRA UTILITIES
Ultrashort ETF's:
DUG ULTRASHORT OIL & GAS
DXD ULTRASHORT DOW 30
EEV ULTRASHORT EMERGING MARKETS
EFU ULTRASHORT EFA INTERNATIONAL
EWV ULTRASHORT JAPAN
FXP ULTRASHORT CHINA
MZZ ULTRASHORT MID CAP
QID ULTRASHORT QQQQ
REW ULTRASHORT TECHNOLOGY
RXD ULTRASHORT HEALTH CARE
SCC ULTRASHORT CONSUMER SERVICES
SDP ULTRASHORT UTILITIES
SDS ULTRASHORT S&P 500
SIJ ULTRASHORT INDUSTRIALS
SKF ULTRASHORT FINANCIALS
SMN ULTRASHORT BASIC MATERIALS
SRS ULTRASHORT REAL ESTATE
SSG ULTRASHORT SEMICONDUCTORS
SZK ULTRASHORT CONSUMER GOODS
TWM ULTRASHORT RUSSELL 2000
Get more exposure for your investment dollars. Leveraged and inverse funds, designed to pursue a multiple, or inverse multiple, of an index or benchmark on a daily basis, have grown in number and popularity in recent years. Utilize leveraged investment techniques that magnify gains and losses and result in greater volatility in value.
Each Ultra or UltraShort seeks a return that is a multiple or inverse multiple (e.g., -200%) of the return of an index or other benchmark (target) for a single day. Due to the compounding of daily returns, returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period.
Ultra ETFs:
More leverage in the Ultra ETFs. Buying an Ultra ETF is somewhat similar to buying a call option
UltraShort ETFs:
More leverage in the UltraShort ETFs. Buying an UltraShort ETF is somewhat similar to buying a put option since they have an inverse relationship to the underlying component.
Ultralong ETF's:
UYM ULTRA BASIC MATERIALS
UGE ULTRA CONSUMER GOODS
UCC ULTRA CONSUMER SERVICES
DDM ULTRA DOW 30
UYG ULTRA FINANCIALS
RXL ULTRA HEALTH CARE
UXI ULTRA INDUSTRIALS
MVV ULTRA MIDCAP
DIG ULTRA OIL & GAS
QLD ULTRA QQQQ
URE ULTRA REAL ESTATE
UWM ULTRA RUSSELL 2000
SSO ULTRA S&P 500
USD ULTRA SEMICONDUCTORS
ROM ULTRA TECHNOLOGY
UPW ULTRA UTILITIES
Ultrashort ETF's:
DUG ULTRASHORT OIL & GAS
DXD ULTRASHORT DOW 30
EEV ULTRASHORT EMERGING MARKETS
EFU ULTRASHORT EFA INTERNATIONAL
EWV ULTRASHORT JAPAN
FXP ULTRASHORT CHINA
MZZ ULTRASHORT MID CAP
QID ULTRASHORT QQQQ
REW ULTRASHORT TECHNOLOGY
RXD ULTRASHORT HEALTH CARE
SCC ULTRASHORT CONSUMER SERVICES
SDP ULTRASHORT UTILITIES
SDS ULTRASHORT S&P 500
SIJ ULTRASHORT INDUSTRIALS
SKF ULTRASHORT FINANCIALS
SMN ULTRASHORT BASIC MATERIALS
SRS ULTRASHORT REAL ESTATE
SSG ULTRASHORT SEMICONDUCTORS
SZK ULTRASHORT CONSUMER GOODS
TWM ULTRASHORT RUSSELL 2000
Wednesday, November 4, 2009
Option Time Value Deterioration (Theta)
Since options have a specific life span, it makes sense that their values change throughout that period of time. Option Theta tells you the extrinsic value or how much an option changes (loses) each day before its expiration date. Thus, Theta is the estimation of how much of the option’s value has decreased for any specific day it is being traded. Since Theta has a negative influence on an option’s value, it is always represented as a negative value. Assume that you have an option with a value of 3.25 and a corresponding Theta of –0.25. You can then expect that tomorrow the option’s value will decline to 3.00 (i.e. 3.25-0.25). As long as the underlying asset’s price opens at the same price as the previous closing price. This graph shows what happens to an out-of-the-money Call option as it continues toward its expiration date. The amount the option’s value declines each day is ultimately what Theta determines. As the expiration date becomes closer, the option’s value declines at a faster rate. Notice the highlighted area, which represents the last 30 days of the option’s life. This is when the theta is eroding the value of the option at its fastest rate as demonstrated below in this graph.
S&P 500 (SPY) Iron Condor Trade Example:
Buy to open: December 115.00 strike calls (FYNLK)
Sell to open: December 110.00 strike calls (FYNLF)
Sell to open: December 100.00 strike puts (FYSXV)
Buy to open: December 95.00 strike puts (FYSXQ)
Limit credit: 2.00
December 115 call = -0.0159 (bought) = -0.0159
December 110 call = -0.0279 (sold) = +0.0279
December 100 put = -0.0304 (sold) = +0.0304
December 95 put = -0.0180 (bought) = -0.0180
Summary
Since we sold the middle options, then the theta is actually a positive for us. The options we bought (outside strikes) have negative deterioration against us.
December 115 call = -0.0159
December 110 call = +0.0279
December 100 put = +0.0304
December 95 put = -0.0180
The sum of -0.0159 and -0.0180 = -0.0339
The sum of +0.0279 and +0.0304 = +0.0583
Adding -0.0339 and +0.0583 = +0.0244
Summary:
This means every day you can stay in the option trade (not taking into account stock price changes) you will profit +0.0244 on the number of contracts traded from time value deterioration. If the stock moves outside of these strike prices and then returns back to them a month later, then you will have a big gain because of all that time that has deteriorated in your favor!
Iron Condor Trade details:
Buy the December Iron Condor
Buy to open: 115.00 strike calls
Sell to open: 110.00 strike calls
Sell to open: 100.00 strike puts
Buy to open: 95.00 strike puts
Limit credit = 2.00
Breakeven prices are $98.00/share & 112.00/share
Max risk = 3.00
Max reward = 2.00
S&P 500 (SPY) Iron Condor Trade Example:
Buy to open: December 115.00 strike calls (FYNLK)
Sell to open: December 110.00 strike calls (FYNLF)
Sell to open: December 100.00 strike puts (FYSXV)
Buy to open: December 95.00 strike puts (FYSXQ)
Limit credit: 2.00
December 115 call = -0.0159 (bought) = -0.0159
December 110 call = -0.0279 (sold) = +0.0279
December 100 put = -0.0304 (sold) = +0.0304
December 95 put = -0.0180 (bought) = -0.0180
Summary
Since we sold the middle options, then the theta is actually a positive for us. The options we bought (outside strikes) have negative deterioration against us.
December 115 call = -0.0159
December 110 call = +0.0279
December 100 put = +0.0304
December 95 put = -0.0180
The sum of -0.0159 and -0.0180 = -0.0339
The sum of +0.0279 and +0.0304 = +0.0583
Adding -0.0339 and +0.0583 = +0.0244
Summary:
This means every day you can stay in the option trade (not taking into account stock price changes) you will profit +0.0244 on the number of contracts traded from time value deterioration. If the stock moves outside of these strike prices and then returns back to them a month later, then you will have a big gain because of all that time that has deteriorated in your favor!
Iron Condor Trade details:
Buy the December Iron Condor
Buy to open: 115.00 strike calls
Sell to open: 110.00 strike calls
Sell to open: 100.00 strike puts
Buy to open: 95.00 strike puts
Limit credit = 2.00
Breakeven prices are $98.00/share & 112.00/share
Max risk = 3.00
Max reward = 2.00
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