Conservative Options Trades

ORCL:

http://finance.yahoo.com/news/oracles-3q-earnings-disappoint-122830931.html

http://finance.yahoo.com/q/ks?s=ORCL+Key+Statistics

http://investing.money.msn.com/investments/financial-statements?symbol=orcl

http://finance.yahoo.com/q/bc?s=ORCL&t=5d&l=on&z=l&q=l&c=

http://finance.yahoo.com/q/bc?s=ORCL&t=1y&l=on&z=l&q=l&c=

Trade:

Sept 26/21 bull put spread for $27
Yield = 27/473 = 5.7% in 182 days = 5.7(365/182) = 11.4% annualized
Prob = 88%
Expectation = .88(27) - .01(473) - .11(236) = 23.8 - 4.7 - 25.9 = -6.8

note: A slightly negative expectation is a warning sign that option prices are against us. With a heavy market like ORCL the MM's are sure to be on their toes and no gifts are to be expected.

A return of $35 would produce an expectation of: .88(35) - .01(465) - .11(232) = 30.8 - 4.7 - 25.5 = 0

So I would need $35 instead of the $27 that was being offered by the market at closing. I will watch and wait for ORCL to stabilize and see if the MM's make us a better offer in the future, or I could try for the $35 at open to see if I get filled.

Often in a dynamic market you can get filled 'out of market' at the open just due to opening volatility. In addition ORCL could fall further which would push option prices up but would also lower computed probabilities.

Probably best to just wait.
 
Quote from diaoptions:

I at first didn't like DanShirley's posts. Now after some thought I like his posts and will be contributing to his thread, I'm like his little helper.

helper_2005.jpg



:)
More...


.....:)
 
http://finance.yahoo.com/news/oracles-3q-earnings-disappoint-122830931.html

http://finance.yahoo.com/q/ks?s=ORCL+Key+Statistics

http://investing.money.msn.com/investments/financial-statements?symbol=orcl

http://finance.yahoo.com/q/bc?s=ORCL&t=5d&l=on&z=l&q=l&c=

http://finance.yahoo.com/q/bc?s=ORCL&t=1y&l=on&z=l&q=l&c=

Trade:

Sept 26/21 bull put spread for $27
Yield = 27/473 = 5.7% in 182 days = 5.7(365/182) = 11.4% annualized
Prob = 88%
Expectation = .88(27) - .01(473) - .11(236) = 23.8 - 4.7 - 25.9 = -6.8

note: A slightly negative expectation is a warning sign that option prices are against us. With a heavy market like ORCL the MM's are sure to be on their toes and no gifts are to be expected.

A return of $35 would produce an expectation of: .88(35) - .01(465) - .11(232) = 30.8 - 4.7 - 25.5 = 0

So I would need $35 instead of the $27 that was being offered by the market at closing. I will watch and wait for ORCL to stabilize and see if the MM's make us a better offer in the future, or I could try for the $35 at open to see if I get filled.

Often in a dynamic market you can get filled 'out of market' at the open just due to opening volatility. In addition ORCL could fall further which would push option prices up but would also lower computed probabilities.

Probably best to just wait.
 
DRI:

http://finance.yahoo.com/news/darden-3q-profit-falls-tops-112607535.html

http://www.thestreet.com/story/1187...arden-restaurants.html?puc=yahoo&cm_ven=YAHOO

http://finance.yahoo.com/q/ks?s=DRI+Key+Statistics

http://investing.money.msn.com/investments/financial-statements?symbol=DRI

http://finance.yahoo.com/q/bc?s=DRI+Basic+Chart

Trade:

Jan '14 40/35 bull put spread for a net credit of $61
Yield = 61/439 = 13.9% in 297 days or 13.9(365/297) = 17.1% annualized.
Prob = 91%
Expectation = .91(61) - .02(439) - .07(219)= 55.5 - 8.78 - 15.33 = 31.39
 
http://www.thestreet.com/story/1187...ve-below-are-buys.html?puc=yahoo&cm_ven=YAHOO

http://finance.yahoo.com/news/ahead-bell-dollar-general-110554670.html



Symb........Market Cap......P/E.........P/B.....Margin

DG............17.2................18.3.......18.3......6.0%
FDO............7.0................16.9........5.2.......4.4%
DLTR.........10.9................18.0........6.5.......8.3%
FIVE...........2.2..................NA........44.0......3.6%

http://stockcharts.com/freecharts/perf.php?DG,FDO,DLTR,SPY

DG Trade:
http://finance.yahoo.com/q/bc?s=DG&t=1y&l=off&z=l&q=l&c=

Nov 40/35 bull put spread for $30
Yield = 35/465 = 7.53% in 231 days or 11.9% annualized
Prob = 88%
Expectation = .88(35) - .04(465) - .08(232) = 30.5 - 18.6 - 18.6 = -6.7

The closing bid/ask on the spread was .25/.65.

.35 is the min I would take.
 
SPY:

market-outlook-1q2013.png


http://www.forbes.com/sites/investo...alued-stock-market-peak-time-to-book-profits/

http://www.forbes.com/sites/investor/2013/03/25/three-etfs-to-short/

With the S&P at an all time high there are a lot of articles accumulating to say that the market is 'overvalued'

http://finance.yahoo.com/q/bc?s=SPY&t=my&l=on&z=l&q=l&c=

Of course there are also a lot of 'momentum' people who say 'The sky's the limit'.

:-)

Here is a low risk trade to make a little money if the overvaluation thesis is true... and the market recognizes it by next December.

Trade:
With SPY at 156.19:
Dec 170/172 bear call spread for a net credit of $41
Yield = 41/159 = 26% in 267 days or 36% annualized.
Prob = 82%
(it even has a positive expectation)
Expectation = .82(41) - .15(159) - .03(80) = 33.6 - 23.8 - 2.4 = 7.4

Price.................P/L
150..................$41
155..................$41
160..................$41
165..................$41
170..................$41
175..................($159)
180..................($159)
 
CRL:

http://finance.yahoo.com/news/ahead-bell-charles-river-laboratories-110804292.html

http://finance.yahoo.com/news/mixed-4q-charles-river-195629464.html

http://finance.yahoo.com/q/bc?s=CRL&t=5y&l=off&z=l&q=l&c=

With CRL at 44.16

Nov 55/60 bear call spread for a net credit of $60
Yield = 60/440 = 13.6% in 226 days or 22% annualized
Prob = 84%
Expectation = .84(60) - .09(440) - .07(220) = 50.4 - 39.6 - 15.4 = -4.6
With a fill at $60 you get a neutral to negative expectation.
Currently the bid/ask on the spread is .20/.60
So a fill at $60 is very unlikely... but possible and I need at least $60 to make a statistically sound trade.
If CRL goes down on the downgrade it might make a better trade.
I'll put this trade on the wait list.
 
CRL ct'd:

CRL has indeed dropped:
http://stockcharts.com/h-sc/ui?s=crl

and has left my previous proposed credit spread with a credit of $0.

New Trade:
With CRL at 42.65

Nov 45/40 bear put spread for a net debit of $275

Price.............P/L
30................225
35................225
40................225
42.25...........0.0
45...............(275)
50...............(275)
 
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