Spin,
Omaha steaks??
That's what comes out of the back of an Alberta steer!!!
Seriously, Alberta AAA beef aged 28 days is better than anywhere else except for beer fed Japanese beef, which is a little hard to get around here. I've eaten beef all over North America and in the UK and Ireland (over in Europe, the beef is garbage-- grass fed-- tastes like a tough dandelion salad) and corn fed beef is simply not as good as barley fed beef. Come on up and I'll prove it to you. Mind you, you might find the winters a bit tough up here.
Try July, when the weather is very nice. Our mountains are also extremely nice. I'd be glad to show you and Walt around.
Now for the options:
I randomly selected Google as a possible play. There may be others that are much better, and I haven't a clue when earnings are coming out or anything like that. I'm just keeping things very simple for purposes of doing a calendar collar. I'm also going to assume that the IV will not be changing, although in real life, I'm sure that it will!
Here's what I came up with:
Stock price at Thursday close-- 618.48
Feb 620 Calls-- 24.25 (midpoint price)
Jan 620 Puts-- 13.25 (midpoint price)
This means you own the collar plus you have a cash credit of $11.00 . At any point in the future before the Jan expiry, if you can obtain the Feb 620 put for less than $11.00, or repurchase the call for less than $11, you will be ahead of the game.
Now I have used the Jan options chain and the Feb options chain to estimate prices at the Jan expiry. We have less than three weeks to go until the Jan expiry, with the Jan 1 holiday considered in the mix, so prices at expiry will be slightly higher than the current Jan prices as a quick rule of thumb.
Now, I'm going to envision three cases--
A) GOOG goes down $30 or about 10%
B) GOOG stays at the current price
C) GOOG goes up $30 or about 10%
In A the value of the stock plus the put= $620 as it will for any point below $620. The calculated value of the call will be about $3.50 to $4.00. I obtained this by moving up the chain 30 dollars and adding a little extra time value, as the Jan 650 call is currently valued at $2.88. Purchasing a new put would cost about $30-35 dollars which would not work very well. However, with your $11 in cash, you could easily buy back the call, and come out ahead by about $6 or $7 on the deal.
In B, the value of the stock plus the put is also $620. However, at the Jan expiry, the call will still be worth more than $11, and the new put will probably cost around $14 or $15, or a little more than now. This means a small loss of about $3-4 in the cash position, and a small net loss of about $2-3.
In C, the value of the stock would be about $650, a nice gain in stock value, the put would be worthless, but the call would have increased in value. To obtain its value, I moved $30 in the call chain the other way and added a little time value. This gave me about $34 or so. I still have the $11 in cash, which I could use to buy a cheap put. I estimate the cost of the new put at around 5-6 dollars. In this case, it could make sense to buy the put and have about 5-6 dollars in cash to be ahead of the game. You also could simply sell out and take your small profit. Note that this is only a profit of about 1% of the original capital required to play without margin.
Note that a person can adjust the position at anytime if it seems the prices are relatively favourable. I'd give this a decent chance of modest success, at the very least. I think it is clear that decent movement in either direction leads to happy results, and no movement or very small movements lead to small losses.
Omaha steaks??
That's what comes out of the back of an Alberta steer!!!
Seriously, Alberta AAA beef aged 28 days is better than anywhere else except for beer fed Japanese beef, which is a little hard to get around here. I've eaten beef all over North America and in the UK and Ireland (over in Europe, the beef is garbage-- grass fed-- tastes like a tough dandelion salad) and corn fed beef is simply not as good as barley fed beef. Come on up and I'll prove it to you. Mind you, you might find the winters a bit tough up here.
Try July, when the weather is very nice. Our mountains are also extremely nice. I'd be glad to show you and Walt around.
Now for the options:
I randomly selected Google as a possible play. There may be others that are much better, and I haven't a clue when earnings are coming out or anything like that. I'm just keeping things very simple for purposes of doing a calendar collar. I'm also going to assume that the IV will not be changing, although in real life, I'm sure that it will!
Here's what I came up with:
Stock price at Thursday close-- 618.48
Feb 620 Calls-- 24.25 (midpoint price)
Jan 620 Puts-- 13.25 (midpoint price)
This means you own the collar plus you have a cash credit of $11.00 . At any point in the future before the Jan expiry, if you can obtain the Feb 620 put for less than $11.00, or repurchase the call for less than $11, you will be ahead of the game.
Now I have used the Jan options chain and the Feb options chain to estimate prices at the Jan expiry. We have less than three weeks to go until the Jan expiry, with the Jan 1 holiday considered in the mix, so prices at expiry will be slightly higher than the current Jan prices as a quick rule of thumb.
Now, I'm going to envision three cases--
A) GOOG goes down $30 or about 10%
B) GOOG stays at the current price
C) GOOG goes up $30 or about 10%
In A the value of the stock plus the put= $620 as it will for any point below $620. The calculated value of the call will be about $3.50 to $4.00. I obtained this by moving up the chain 30 dollars and adding a little extra time value, as the Jan 650 call is currently valued at $2.88. Purchasing a new put would cost about $30-35 dollars which would not work very well. However, with your $11 in cash, you could easily buy back the call, and come out ahead by about $6 or $7 on the deal.
In B, the value of the stock plus the put is also $620. However, at the Jan expiry, the call will still be worth more than $11, and the new put will probably cost around $14 or $15, or a little more than now. This means a small loss of about $3-4 in the cash position, and a small net loss of about $2-3.
In C, the value of the stock would be about $650, a nice gain in stock value, the put would be worthless, but the call would have increased in value. To obtain its value, I moved $30 in the call chain the other way and added a little time value. This gave me about $34 or so. I still have the $11 in cash, which I could use to buy a cheap put. I estimate the cost of the new put at around 5-6 dollars. In this case, it could make sense to buy the put and have about 5-6 dollars in cash to be ahead of the game. You also could simply sell out and take your small profit. Note that this is only a profit of about 1% of the original capital required to play without margin.
Note that a person can adjust the position at anytime if it seems the prices are relatively favourable. I'd give this a decent chance of modest success, at the very least. I think it is clear that decent movement in either direction leads to happy results, and no movement or very small movements lead to small losses.
