Bought 3 CM.TO 10Oct Puts @ 5.00, Mark $74.02

I’ve been watching CIBC (CM.TO) for a few months now. CM finally presented a shorting opportunity that I took today. Figure 1 speaks for itself. Furthermore, the lackluster rally in EUR/USD after the ECB’s vouch for confidence is encouraging for the bears.

CIBC (CM.TO)

$74.00 – $74.50 is a strong resistance for CM. There are three scenarios in which this trade can play out. CM can go up, go down, or move sideway.

If CM move upward, I will watch the push above $74.50. My current exit stop is at $75.00 (about $1 on the premium). However, as this is an options position. There is a time decay factor working against me. As such, I will decrease my exit stop by $1.00 on the share price every month to compensate. For example, by mid-June, my exit stop is $74.00 on the underlying share price of CM.

If CM move downward, I will move my stop to breakeven if it breaks below $72.

If CM move sideway, I will give it a month’s time. If CM just consolidates around $74, I will exit by late June for a loss of $1 ($300 total) on the premium.

My targets are $70, $68, and $65 as shown on Figure 1. I will tighten my stop passing each support level.

My ideal loss is $300 at most. That represents 3.4% of my total account on this trade.

Related posts:

1. Bought 3 CM 10OCT Puts 74.00 @ 5.65, Mark 72.30
2. Bought 4 MFC 10OCT Puts 17.00 @ $1.48, Mark $16.38
3. Bought 3 ABX 10OCT Puts 46.00 @ 4.00, Mark $44.67
4. Sold 4 MFC 10OCT Puts 17.00 @ @1.43, Mark $16.27, Loss -0.5%
5. Bought 4 MFC Jan 2010 Puts 14.00 @ 1.70, Mark $13.25