Covered Call, page-28

CD - which trade are you referring to?

Short CBA vs Long NAB? I got in at A$0.80 and it moved today between about A$0.40 and A$1.33. End result fdor me after 2 days is
A$380 profit on NAB and A$300 loss on NAB (unrealised). The trade is based on historic ratios of price difference. I am betting that the recent out performance of CBA will end and NAB will close the gap. Over the last year the low has been -A$0.78c and the highest has been A$16.70. So, looking at historic ratio's I am betting a possible A$1.60 x 1000 loss = A$1,680 versus a possible maximum profit of about A$16.00 x 1000 = A$16,000. Looking at the risk/reward profile I couldn't be happier. A mid point of the range is about A$9.50, so would probably look at exiting around that level, but obviously will monitor closely and watch for dividends etc.

The best time to do these trades is when you see a ratio at a low or high end of the range, and with volatile markets. I don't have the risk appetite to go long NAB without a hedge, so a relative hedge ensures i can sleep like a new born pup at night