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Current Price: 25.46
Technical Analysis: Uptrend - Buy signal (MACD crosses up, RSI crosses 50, 5ema crosses 20ema, Break down trendline)
Expected price movement: Price reaches 27 in a couple of month.
Possible strategies:
1. Bull call:
BTO November 09 strike 26 call at $0.8
STO November09 strike 27 call at $0.35
Net Debit: 0.45. Position delta: 14.92
Maximum risk $0.45.
Maximum profit: 0.55
ROI 0.55/0.45 = 120% in 50 days
Break Even: 26.45
PE: Stock above 27 at expiration or at 20% gain.
SE: Stagnant – close position at loss.
Bearish: close position at 50% loss.
2. Bull call II:
BTO November 09 strike 25 call at $1.25
STO November 09 strike 26 call at $0.65
Net Debit: 0.6 Position delta: 16.63
Maximum risk $0.6.
Maximum profit: 0.4
ROI 0.4/0.6 = 66% in 50 days
Break Even: 25.6
PE: Stock above 26 at expiration
SE: Stagnant – Close position around break even
Bearish: close position at 50% loss.
3. Diagonal
BTO April 10 Strike 27 call at $1.4
STO Oct 09 Strike 26 call at $0.2
Net debit : $1.20 Position delta :8.38 , Theta -0.5
PE: Oct 09 call expires worthless, sell November call
SE: Roll short call up and out when short call is ITM
Maximum profit:
ROI:?
4. Calendar:
BTO April 10, Strike 27 call at $1.4
STO Nov 09 Strike 27 call at $0.35
Net Debit: $1.05
PE: Nov options expired worthless, sell December call
SE: Roll short call up and out when short call is ITM
Maximum Profit: ROI: ?
5. Call:
BTO April 10 Strike 26 call at 1.40
6. Naked put:
STO Nov 09 Strike 25 at $0.65
PE: options expired worthless
SE: own stock at cost basis 24.35
Posts
CH, Following are my comments:
ReplyDeleteTechnical, it does indicate that the stock is consolidating and ready to push upwards.
Fundamentally, I think all commodities are bullish eventually because of the long term weakness of the dollar. On the other hand, I suspect that the US$ may rally short term because it has reached a very oversold level and may turn for a a short period. Longer term it is going to go down again because of fundamentals.
I do not like to use diagonal or calendar trades for this kind of technical picture. You will have to adjust from a stagnant trend trade to a bullish trend trade.
So my preference is a bull put. It has gone down on Friday but reaching a very important support at around 23.5 to 24. So a bull put 25/24 should give pretty decent premium.
I may even go for a naked put at 24. But be ready to take ownership of the stock and collar it if the overall market trend pulls it down. This is probably my most preferred trade.
Also, a call may work too but will need adjustment when the market turns very bearish.
With current market environment a bull put is the most conservative and safe trade. If you are ready to take more risk, go for a naked put.
Just a note: This trade was posted by CH on 9/30. He has not entered the trade.
ReplyDeleteThe stock has gone down on Friday. It may a good opportunity for the trade now as the premium has increased substantially for credit trades because the price had gone down and volatility has increased.