Following the recent covered call position I undertook in Apple shares, noticing the abysmal day today, I sold/bought Google puts for a Credit Spread position to take advantage of the rather high prices of options these days. With Google plummeting to new recent lows, I ventured into a position which requires additional substantial losses of close to 20% down within the next month to occur in order to lose money. If Google improves or stays the same, I pocket close to $800. Here's how it works:

Google was around $292 at the time of the trade.

I sold a GOOG 250 Put Dec expiry for 11.12

I bought a GOOG 200 Put Dec expiry for 3.4

This creates the "credit spread".

By December, as long as Google closes above $250/share, I keep the difference between the two positions. If Google drops below $250, I have to pay the difference at expiry to close out the position (but I keep the $770 premium spread, so really, shares must drop to below $243 to lose a dollar). If Google goes bankrupt (as unlikely as it sounds, I don't risk $25,000 to save $340), my max loss is capped at the difference of 5K-770 = $4300.

This is a lot of money and shouldn't be taken lightly. But at the same time, drastic times call for drastic measures and with the markets off over 40% in the US and close to 80% internationally, it's entirely plausible that markets are oversold and at a minimum, we'll see some stability in the coming weeks. We know unemployment is set to rise further and we've been in recession for some time now. The market has priced that in. But are we going to revert to 1990's share prices?

To new investors; not a trade for you. Research options thoroughly and start with covered calls if anything. To experienced options traders, what are your thoughts and what trades are you making right now?

UPDATE: In December, Google closed above the $250 strike, so the options expired worthless. Full update here.

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