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1,300% Gain in One Day? Not so Fast


Would you like to book a $1,300% gain on a one day low risk trade? I would. That would imply that you turned your $100,000 account into $1,400,000 in just one day. Do it couple times - and you are a billionaire. Sounds too good to be true? It is possible in a Twitterworld. In a real world.. not so much.

Last week I came across the following Tweet:
 


And the following followup the next day:
 


1,300% return in one day??

This is how the trade looks in ONE software at the time of the opening:

image.png

ONE shows a maximum return of only ~7%. What is going on here?

This trade is long one call and short 2 calls. Which means one of the calls is naked and requires huge margin requirement. 

If you are not a member yet, you can join our forum discussions for answers to all your options questions.

When the trade was closed on Apr.17, this is how it looked:

image.png

Explanation for "1,300% gain"?

image.png

This calculation ignores the margin requirement on the short options. When a trade requires a margin (like credit spreads or naked options), the return cannot be calculated on cash outcome - it has to account for margin requirement.

As a side note, it was a good trade. No downside risk, and upside risk starts at 2,900 (over 100 points move in one day). But the gain was nowhere near 1,300%.

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