Conservative Options Trades

UBS:
http://www.marketwatch.com/story/ubs-ceo-gruebel-resigns-in-wake-of-rogue-trades-2011-09-24
http://www.cnbc.com/id/44653674?__source=yahoo|headline|quote|text|&par=yahoo
http://finance.yahoo.com/q/pr?s=UBS+Profile
http://moneycentral.msn.com/investo...ment=10YearSummary&symbol=US:UBS&stmtView=Qtr
http://finance.yahoo.com/q/ks?s=UBS+Key+Statistics
http://finance.yahoo.com/q/bc?s=UBS&t=2y&l=off&z=l&q=l&c=

Jan '12 = 118 DAYS
Trade 1: Bear put spread
With UBS at 11.25 buy the Jan '12 12.50 put and sell the Jan '12 10.00 put for a net debit of $135

Price..........................P/L
9.00.........................115
10.00.......................115
11.00.........................14
12.00.......................(85)
13.00.......................(135)
14.00.......................(135)

Trade2: bear call spread
Sell the Jan '12 15 call and buy the Jan '12 17.50 call for a net credit of $15.

Price..........................P/L
9.00........................ .15
10.00........................15
11.00........................15
12.00........................15
13.00........................15
14.00........................15
15.00........................15
16.00.......................(85)
17.00......................(186)
18.00......................(235)

Probabilities and expectation based on previous price behavior are meaningless in this type of situation.
 
 
WAG:
http://www.bloomberg.com/news/2011-...helped-by-prescription-demand.html?cmpid=yhoo
http://finance.yahoo.com/q/ks?s=WAG+Key+Statistics
http://moneycentral.msn.com/investo...ment=10YearSummary&symbol=US:WAG&stmtView=Qtr
http://finance.yahoo.com/q/bc?t=5d&s=WAG&l=on&z=l&q=l&c=&c=^DJI
http://finance.yahoo.com/q/bc?t=5y&s=WAG&l=on&z=l&q=l&c=

Trade:
Sell the Jan '12 25 put and buy the Jan '12 22.50 put for a net credit of $20
Yield = 20/230 = 8.7% in 115 days or 27.6% annualized.
Prob = 93.5%
Expectation = .935(20) - .021(230) - .044(115) = 18.7 - 4.8 -5.1 = 8.8
Prob and Expectation based on prior distribution of stock price.
 
BA:
http://www.reuters.com/article/2011/09/28/us-boeing-idUSTRE78R03420110928
http://www.fool.com/investing/general/2011/09/27/congrats-boeing-but-now-your-run-is-done.aspx
http://moneycentral.msn.com/investo...ement=10YearSummary&symbol=US:BA&stmtView=Qtr
http://finance.yahoo.com/q/bc?s=BA&t=5d&l=off&z=l&q=l&c=
http://finance.yahoo.com/q/bc?s=BA&t=5y&l=off&z=l&q=l&c=
"The first nine years of this multi-decade revenue stream are going to look simply awful. As far back as June, Boeing had been warning investors that despite enjoying incredible sales success, the 787 would not actually become profitable "for some time." Yesterday, management put a number on that caveat: New Dreamliners will begin grossing profits by 2020"

Trade:
With BA at 62.78
Jan '12 Iron Condor
http://www.investopedia.com/terms/i/ironcondor.asp#axzz1ZEC74bEx
Sell the 52.50 put and the 72.50 call
Buy the 50 put and the 75 call

Lower breakeven = 51.56 Upper breakeven = 73.44
...........................P/L.................Prob
45....................(156).................7%
50....................(156)................16%
55.....................94....................28%
60.....................94....................42%
65.....................94....................44%
70.....................94....................31%
75.....................(156)...............21%
80.....................(156)...............14%

Potential yield = 94/156 = 60.2% in 115 days
One could take the top half or the bottom half of the Iron Condor alone.
 
HES:
http://blogs.barrons.com/stockstowa...en-down-oil-stocks-barclays/?mod=yahoobarrons
http://finance.yahoo.com/news/Hess-Sees-Higher-Shale-zacks-3913725771.html?x=0&.v=1
http://finance.yahoo.com/q/ks?s=HES+Key+Statistics
http://finance.yahoo.com/q/bc?s=HES&t=5y&l=on&z=l&q=l&c=

Trade:
Sell the Jan '12 35 put and buy the Jan '12 30 put for a net credit of $36.
Yield = 36/464 = 7.8% in 115 days or 24.6% annualized
Prob = 91.6%
Expectation = .916(36) - .03(464) - .06(232) = 33 - 13.9 - 13.9 = 5.2
 
 
YHOO:
http://finance.yahoo.com/news/And-the-Drama-Continues-for-zacks-640432760.html?x=0&.v=1
http://finance.yahoo.com/q/bc?s=YHOO&t=5y&l=on&z=l&q=l&c=

Sell the Jan '12 12.50 put and buy the Jan '12 10 put for a net credit of $92
Yield = 92/158 = 58% in 113 days or 188% annualized
Prob = 51%
Expectation = .51(92) - .22(158) - .27(79)= 46.9 - 34.8 - 21.3 = -9.2

The expectation on the trade is not important IF the takeover gells, but without the takeover and based solely on stock price distributions this is not a very good trade.
 
 
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