Conservative Options Trades

Speculation Trade:

HLF:

http://www.cnbc.com/id/100389459?__source=yahoo|headline|quote|text|&par=yahoo

http://seekingalpha.com/article/1120701-smoke-and-mirrors-in-the-herbalife-saga?source=yahoo

http://seekingalpha.com/article/1121761-herbalife-s-value-chain-can-you-spot-the-loser?source=yahoo

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

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

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


Trade:

With HLF at 43.52
Buy the May 35 put and sell the May 32.50 put for a net debit of $90.
(bear put spread)

Price.....................P/L
45.......................(90)
40.......................(90)
35.......................(90)
34.10....................0
30.....................$160
25.....................$160
 
Quote from oldnemesis:

Speculation Trade:

HLF:

http://www.cnbc.com/id/100389459?__source=yahoo|headline|quote|text|&par=yahoo

http://seekingalpha.com/article/1120701-smoke-and-mirrors-in-the-herbalife-saga?source=yahoo

http://seekingalpha.com/article/1121761-herbalife-s-value-chain-can-you-spot-the-loser?source=yahoo

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

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

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


Trade:

With HLF at 43.52
Buy the May 35 put and sell the May 32.50 put for a net debit of $90.
(bear put spread)

Price.....................P/L
45.......................(90)
40.......................(90)
35.......................(90)
34.10....................0
30.....................$160
25.....................$160
More...

I don't like this trade only because I think the vol is too high. I am short the ATM straddle in may (with some extreme wing protection)
 
AAPL:

http://www.marketwatch.com/story/apple-earnings-flat-despite-sales-gain-2013-01-23

http://www.marketwatch.com/story/stock-futures-mixed-apple-tanks-nasdaq-100-2013-01-24?siteid=yhoof2

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


I don't know what Apple will open at but using closing numbers:

Sell the July 350 put and buy the July 340 put for a net credit of $34
Yield = 34/966 or 3.5% in 177 days or 7.2% annualized

Given Apple's extreme volatility at this point estimates of probability and expectation need to be taken with several pounds of salt:

Prob = 95%
Expectation = .95(34) - .04(966) - .01(483) = 43.3 - 38.6 - 4.8 = 0
 
Quote from oldnemesis:

AAPL:

I don't know what Apple will open at but using closing numbers:

Sell the July 350 put and buy the July 340 put for a net credit of $34
Yield = 34/966 or 3.5% in 177 days or 7.2% annualized

Given Apple's extreme volatility at this point estimates of probability and expectation need to be taken with several pounds of salt:

Prob = 95%
Expectation = .95(34) - .04(966) - .01(483) = 43.3 - 38.6 - 4.8 = 0
More...

When evaluating "calculated probabilities" on any trade that exceeds 3 months, and an earnings cycle,... those probability calculations should all be taken more as a source of amusement, than any kind of useful analysis.
Thus, all six month (2 earning cycle) prob analysis, are just silly..... unless you are doing utility type stocks.
(I say that with 99% certainty):D
 
AAPL:

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

Not as big a drop as I expected.

New trade calculation:

Sell Jul 350 put and buy Jul 340 put for a net credit of $85
Yield = 85/915 = 9.3% in 177 days or 19.2% annualized.
Prob = 91%
Expectation = .91(85) - .075(915) - .015(457) = 77.4 - 68.6 - 6.9 = 1 which of course is not different from zero.

So with the price drop options prices have adjusted proportionately.

AAPL options are always priced very close to probability levels and thus the spread has no statistical advantage... which is the meaning of a zero expectation.

Perhaps if I had watched during the day there would have been times that a statistical advantage would have been available but I don't have the time to do that.

That's what the market makers are doing.

:-)
 
SWHC:

http://www.nytimes.com/2013/01/25/b...est-from-gun-makers.html?partner=yahoofinance

http://www.nytimes.com/2013/01/10/business/california-teachers-fund-to-divest-of-gun-stock.html

http://finance.yahoo.com/news/strong-buy-smith-wesson-202848491.html

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

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

With SWHC at 8.90
Buy the Jan 2014 $8.00 put and sell the Jan '14 $5.00 put for a net debit of $115.
(bear put spread)

Price................P/L
4...................$185
5...................$185
6....................$85
7...................($15)
8...................($115)
9...................($115)

Trade hypothesis: SWHC will be below 6 a year from now.

Note: Some people prefer Sturm Ruger as a trading vehicle:

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

http://finance.yahoo.com/q/co?s=RGR+Competitors
 
PIKE:

http://finance.yahoo.com/q/pr?s=PIKE+Profile

http://finance.yahoo.com/news/pike-electric-corporation-declares-special-210100993.html

http://finance.yahoo.com/news/pike-electric-q2-revenue-estimate-132515603.html

http://finance.yahoo.com/news/pike-electric-corp-pike-zacks-060014840.html

Pike Electric Corporation is a leading provider of energy solutions to over 300 investor-owned, municipal and co-operative utilities in the United States. Their comprehensive services include facilities planning and siting, permitting, engineering, design, installation, maintenance and repair of electric and communication infrastructure, including renewable energy projects and storm-related services. Analysts are expecting fiscal 2013 revenue to increase to $901M from $685M in fiscal 2012 and EPS is expected to increase to $0.73 from $0.31. The insider transactions here are slightly bullish as there has been little insider selling despite the rise in stock price. Almost all selling was done to pay taxes on vesting of restricted stock.
http://seekingalpha.com/article/1060761-5-stocks-to-watch-in-power-grid-construction?source=yahoo

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

Trade: With PIKE at 10.51

Buy the May 7.50 call and sell the May 10.00 call for a net debit of $210.

Price..........................P/L
7.00.........................(210)
8.00.........................(160)
9.00..........................(60)
9.60............................0
10.00........................40
11.00........................40
Yield = 40/210 = 19%

Trade hypothesis: PIKE will remain above $10.00 through May expiration.
 
CAT:

http://finance.yahoo.com/news/caterpillar-sees-uncertain-2013-tough-185826493.html

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

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

Trade:

Sell the Jan '14 120 call and buy the Jan 125 call for a net credit of $60
Yield = 60/440 = 13.6% in 354 days or 14.1% annualized

Hypothesis of trade: CAT like the market is 'over bought' and will not pass resistance at 120 this coming year.
http://finance.yahoo.com/q/bc?s=CAT&t=2y&l=off&z=l&q=l&c=
 
STX:

http://finance.yahoo.com/news/seagate-beats-eps-revenues-exceed-172347190.html
http://seekingalpha.com/article/114...nefits-of-industry-consolidation?source=yahoo
http://finance.yahoo.com/q/ks?s=STX+Key+Statistics
http://finance.yahoo.com/q/bc?s=STX&t=2y&l=on&z=l&q=l&c=

STX: Testing Bull Put Spreads for Jan '14 expiration
.......................................P/L.......................................
price..............20/15..........15/10............10/5.........Prob
3.00................(451)...........(482)...........(497)........99%
5.00................(451)...........(482)...........(497)........99%
10.00..............(451)...........(482)............3.00........99%
15.00.............(451)..............18..............3.00........98%
20.00..............49.................18..............3.00........91%
25.00..............49.................18..............3.00........77%
Max-
Ann-Yield:.....10.9%............3.7%............1%
20/15 expectation = 49(.91) - 451(.02) - 225 (.07) = 44.6 - 9.02 - 15.75 = 19.83
The positive expectation implys that the 20/15 bull put spread may be a viable investment... pending many other considerations.
 
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