Conservative Options Trades

[cdcaveman]

Quote from danshirley:

Requiscant in Pace

http://www.reuters.com/article/2012/07/20/us-usa-shooting-denver-idUSBRE86J0AM20120720

http://www.youtube.com/watch?v=AW_gguWNi-I&feature=related

Our church is offering a mass tonight for the victims... but it's the rest of us who need prayers.

God save us.

you wonder what was going through that kids head..

 

[danshirley]

GE:
http://www.nytimes.com/2012/07/21/business/ge-profit-beats-estimates.html?partner=yahoofinance

http://finance.yahoo.com/news/ge-2q-earnings-drop-16-110520975.html

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

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

http://finance.yahoo.com/q/bc?s=GE&t=2y&l=on&z=l&q=l&c=

Trade:
Dec 17/14 bull put spread for a net credit of $24
Yield = 24/276 = 8.7% in 153 days or 20.7% annualized
Prob = 86.9%
Expectation = .869(24) - .01(276) - .12(138) = 20.9 - 2.76 - 16.6
= 1.54

 

[danshirley]

SPY:

http://stockcharts.com/h-sc/ui?s=spy

Create condor from put and call spreads each netting $20 after commissions:

Put Spread
sell 5 Aug 127 put and buy 5 Aug 126 put for a net credit of $35
Commission = $15
Yield = (35 - 15) /(500 -(35 - 15)) = 20/480 = 4.2% IN 26 days or 58% annualized
Prob = 96%
Expectation = .96(20) - .02(480) - .02(240) = 19.2 - 9.6 - 4.8 = 4.8

Call Spread
Sell 5 Aug 142 call and buy 5 Aug 143 call for a net credit of $35
commission = 15
Yield = (35-15)/(500 - (35-15)) = 20/480 = 4.2% in 26 days or 58% annualized
Prob = 85%
Expectation = .85(20) - .11(480) - .04(240) = 17 - 52.8 - 9.6 = -45.4

Put spread is good, call spread is a loser based on probability.

If done separately expectation = 4.8 - 45.4 = -40.6

If done combined:

sell 5 Aug 127 put and buy 5 Aug 126 put & Sell 5 Aug 142 put and buy 5 Aug 143 put for a net credit of $70
Yield = (70 - 30)/(1000 - (70-30)) = 40/960 = 4.2% in 26 days or 58% annualized
Prob = 90.5%
Expectation = .905(13) - .02(87) -.08(87)= 11.8 - 1.76 - 6.9 = 3.14

Can't be wrong both ways at once.

 

[danshirley]

HNZ:

http://finance.yahoo.com/news/heinz-beats-eps-gives-2013-153518019.html

http://finance.yahoo.com/news/heinz-retained-neutral-154520407.html

http://finance.yahoo.com/q/bc?t=5y&s=HNZ&l=on&z=l&q=l&c=&ql=1&c=^GSPC

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

http://finance.yahoo.com/q/ks?s=HNZ+Key+Statistics
(I don't like the trailing P/E, especially for a food company.)

http://blogs.barrons.com/incomeinve...es-up-7-3-dividend-increase/?mod=yahoobarrons
(HNZ payout ratio is 67%)

http://finance.yahoo.com/q/bc?t=5y&s=HNZ&l=on&z=l&q=l&c=&ql=1

Trade:

March '13 45/40 bull put spread for a net credit of $35
Yield = 35/465 = 7.5% in 234 days or 11.7% annualized
Prob = 98%
Expectation = .98(35) - .01(465) - .01(232) = 34.3 - 4.65 - 2.32 = 27.33

 

[danshirley]

MCD:

http://www.bloomberg.com/news/2012-...es-on-slowing-u-s-store-sales.html?cmpid=yhoo

http://www.cnbc.com/id/48290656?__source=yahoo|headline|quote|text|&par=yahoo

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

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

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

http://finance.yahoo.com/q/bc?s=MCD&t=5d&l=off&z=l&q=l&c=^GSPC

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

Trade:

Dec 70/65 bull put spread for $22
Yield = 22/478 = 4.6% in 150 days or 11.2% annualized
Prob = 98%
Expectation = .98(22) - .01(478) - .01(239) = 21.6 - 4.8 - 2.4 = 14.4

 

[danshirley]

CORN:

http://blogs.barrons.com/focusonfun...mp-trigger-halt-funds-slide/?mod=yahoobarrons

http://finance.yahoo.com/q/bc?s=CORN&t=2y&l=on&z=l&q=l&c=

Trade:
with CORN at 49.21
Nov 40/35 bull put spread for a net credit of $55
Yield = 55/445 = 12.36% in 115 days or 39% annualized
Prob = NA
Expectation = NA

 

[danshirley]

NFLX:

http://www.reuters.com/article/2012...eedType=RSS&feedName=globalMarketsNews&rpc=43

http://seekingalpha.com/article/745...y-reports-gain-of-0-11-per-share?source=yahoo

http://finance.yahoo.com/news/netflix-investors-taking-profits-europe-233933849.html

http://www.forbes.com/sites/larryma...t-streaming-is-here-to-stay/?partner=yahootix

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

http://stockcharts.com/h-sc/ui?s=nflx

looking for a 10AM trade.

 

[danshirley]

NFLX Ctd:

I have been unable to get a trade with a positive expectation because of the extreme volatility of the stock. My statistical methodology is not appropriate to these kinds of situations.

e.g.
Jan '13 90/95 bear call spread for $35
Yield = 35/465 = 7.5% in 176 days or 15.6% annualized
Prob = 90.5%
Expectation = .905(35) - .074(465) - .02(232) = 31.7 - 34.4 - 4.5 = - 7.2

Just as well...On NFLX I pass.

 

[danshirley]

MMM:
http://www.bloomberg.com/news/2012-...as-health-care-sales-increase.html?cmpid=yhoo

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

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

http://finance.yahoo.com/q/bc?t=5y&s=MMM&l=on&z=l&q=l&c=&ql=1&c=^GSPC

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

Trade:
with MMM at 91.42:
Jan 70/65 bull put spread for $25
Yield = 25/475 = 5.26% in 175 days or 11% annualized
Prob = 99%
Expectation = .99(25) - .01(475) = 24.75 - 4.75 = 20

for me this is a rollover

 

[danshirley]

MRK:
http://finance.yahoo.com/news/mercks-2q-net-falls-charges-113238222.html

http://finance.yahoo.com/news/merck-beats-affirms-view-131943271.html

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

http://finance.yahoo.com/q/bc?t=5y&s=MRK&l=on&z=l&q=l&c=&ql=1&c=^GSPC

http://finance.yahoo.com/q/bc?t=5y&s=MRK&l=off&z=l&q=l&c=&ql=1


Trade:
with MRK at 45.08:
Jan 37/32 bull put spread for $25
Yield = 25/475 = 5.26% in 175 days or 11% annualized
Prob = 95%
Expectation = .95(25) - .02(475) - .03(235) = 23.75 - 9.5 - 7.1 = 7.15