Conservative Options trades

XEL:
Xcel Energy is a large diversified utility. It pays 4.8% (next payment around Dec 24) and has a beta of just .39. It has a long history of profitability
http://finance.yahoo.com/q/pr?s=XEL
http://finance.yahoo.com/q/ks?s=XEL
http://finance.yahoo.com/q/is?s=XEL
http://moneycentral.msn.com/investo...l=xel&lstStatement=10YearSummary&stmtView=Ann

XCJ is an exchange traded bond from XCEL energy which is paying 7.6%
http://finance.yahoo.com/q/bc?s=XEL&t=2y&l=off&z=m&q=c&c=XCJ,^DJI
Trade 1:
Buy XEL at 20.19 and sell the June 20 call so as to capture 2 dividends.
.....................P/L.........Prob >
15...............(221).........98%
17.50...........(28)...........86%
20................151...........56%
22.50...........151............24%
---------------------------------------
req:.............1929
yield.............7.8% in 203 days or 14% annualized..compared to 7.6% for the bond.
 
XEL: Trade 2
Sell the June 20 put and buy the June 17.50 put for a net credit of $60
.....................P/L
15...............(190)
17.50...........(190)
20.................60
22.50.............60
----------------------------
req:.............190
yield:...........32% in 203 days or 57% annualized

XEL: Trade 3
Buy the June 17.50 call and sell the June 20 call for a total debit of 2.10.
........................P/L
15..................(210)
17.50..............(210)
20...................40
22.50...............40
--------------------------------
REQ:...............210
yield:...............19% in 203 days or 34% annualized.
 
Omega Health Care Investors is a health care REIT that currently pays 6.60% and recently obtained a series of nursing homes from debt stressed CSE. The sale prompted JMP to upgrade OMI to mkt outperform:
http://finance.yahoo.com/q/ud?s=OHI
http://finance.yahoo.com/q/pr?s=OHI
http://finance.yahoo.com/q/ks?s=OHI
http://finance.yahoo.com/q/is?s=OHI

http://moneycentral.msn.com/investo...l=OHI&lstStatement=10YearSummary&stmtView=Ann

http://finance.yahoo.com/news/CapitalSource-Announces-Sale-prnews-4274676858.html?x=0&.v=1

Omega stock has been relatively resistant to the recession:
http://finance.yahoo.com/q/bc?t=2y&s=OHI&l=on&z=m&q=l&c=&c=^DJI

CC on OHI to capture two dividends:

Buy OHI for 18.20 and sell the June 15 call for 3.45. Two dividends will add .60 for a net of 14.16. If called in June at 15:
84/1476 = 5.7% in 199 days or 10.4% annualized.
If called prior to the april dividend then the yield will be 54/1476 = 3.6% in 129 days or 10.35% annualized.
 
TLT:
TLT today is at 93.26 down 1.09:
Sell the June 90 put and buy the June 87 put for a net of 1.20
..............P/L
75........(180)
80........(180)
85........(180)
88.80......0
90.........120
95.........120
----------------------
Risk = 180
Yield = 120/180 = 67% in 196 days or 125% annualized.
Maybe this is the time for TLT to fall below support at 90...maybe not.
:-)
 
OHI Contd:
Bull Put Spread instead of CC with dividend:
Sell the June 15 put and buy the June 12.50 put for a net of $20.
Yield = 20/230 = 8.7% in 196 days or 16.2% annualized.

compared to CC at: 10.4% annualized (including dividend).
 
Teva:
http://finance.yahoo.com/q/bc?s=TEVA&t=2y&l=on&z=m&q=l&c=
http://finance.yahoo.com/news/Teva-Pharmaceutical-3Q-profit-apf-231374664.html?x=0&.v=1
http://moneycentral.msn.com/investo...=teva&lstStatement=10YearSummary&stmtView=Ann

Sell Jan 2011 40 Put and buy Jan 2011 35 put for a net of $60.
Yield = 60/440 = 13.6% in 412 days or 12.1% annualized.
Random variable probability = 91.8%
Expectation = .918(60)- .057(220) - .024(440)= 31.9

http://www.optionistics.com/f/inset...1&sd=13.0403444970611&lb=35&ub=40&numdays=413
 
AMGN:
http://finance.yahoo.com/q?s=amgn
http://finance.yahoo.com/q/pr?s=AMGN
http://finance.yahoo.com/q/is?s=AMGN
http://finance.yahoo.com/q/bs?s=AMGN
http://finance.yahoo.com/q/ks?s=AMGN
http://finance.aol.com/earnings/amgen-inc/amgn/nas/earnings-release
http://moneycentral.msn.com/investor/invsub/analyst/earnest.asp?Symbol=AMGN
http://ichart.finance.yahoo.com/z?s=AMGN&t=2y&q=l&l=on&z=m&c=^DJI&a=v&p=s
trade: 40/35 bull put spread
April:.......Yield= 25/475 = 5.2% in 125 days or 15% annualized. Probability = 98%
July:........Yield = 38/462 = 8% in 216 days or 13% annualized. Probability = 95%
Jan 2011: Yield = 65/435 = 15% in 405 days or 13% annualized. Probability = 88%
:-)
 
My previous WMT bull put spread position has expired and I need to replace it with a similar one. The first question is at what strike pair:
http://finance.yahoo.com/q/bc?s=WMT&t=2y&l=on&z=m&q=l&c=

Looking at the two year chart I will chose 45 as the short strike.

The next question is at what expiration?

One of the nasty boys (there are so many on this board, most of whom I have on ignore) had said that choosing far out strikes was idiotic because "theta was zero and would stay zero" so we wouldn't be compensated for the longer hold periods. Lets look at that issue:

WMT 45/40 bull put spread:

Expiration..........Return........Days..........Annualized......Prob>
20-Mar-10............-.2%..........13....................0..........100%
17-APR-10.............0%............41....................0..........99.9%
19-Jun-10.............1.8%.........104.................6.4%.......99.0%
18-Sep-10.............5.7%.........195............... 10.7.........95.7%
22-Jan-11.............12.4%........321.................14.0%......91.6%
21-Jan-12.............26.3%........685.................14.2%......83.8%

Clearly we ARE compensated for longer hold periods and the computed Theta (which is a lot more complex issue than is assumed by many) is completely irrelevant in such deep ITM puts.

The obvious choice is the 22-Jan-11 expiration which will give us very close to our target 15% annualized yield for this portfolio, although I might also do the Sept expiration if my attitude towards WMT was more watchful.

The aditional .2% on the Jan-12 for an extra year is obviously NOT worth while, at least not on the short side. Plus note the severe drop in probability.
:-)
 
TM:
http://finance.yahoo.com/news/Prius...2.html?x=0&sec=topStories&pos=2&asset=&ccode=

http://finance.yahoo.com/q/bc?s=TM&t=6m&l=off&z=m&q=c&c=

http://www.foxbusiness.com/story/markets/industries/transportation/toyota-fixes-working/



With TM at 77.94
Buy the Jan 2011 75 put for 7.60 and sell the Jan 2011 70 put for 5.30 for a net investment of 2.30
Price..........P/L
65..............270
70..............270
75.............(230)
80.............(230)
85.............(230)
--------------------------
Potential yield = 270/230 = 117%

Probability and expectation are unknown.
:-)
 
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