Conservative Options Trades

MON:

http://finance.yahoo.com/news/monsanto-profit-rises-22-percent-123702599.html

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

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

Trade:
With MON at 104.51
Jan '14 72.5/67.5 bull put spread for a net credit of $30
Yield = 30/470 = 6.38% in 288 days or 8.1% annualized
Prob = 93.6%
Expectation = .94(28) - .04(470) - .02(235) = 26.3 - 18.8 - 4.7 = 2.8
MON pays a 1.4% dividend.

Price...............P/L
65.................(470)
70.................(217)
72.20..............0.0
75...................30
80...................30

This replaces a similar MON trade that expires this month.
 
TEVA:

http://medcitynews.com/2013/03/teva-wins-fda-approval-for-oral-contraceptive/

http://www.investingdaily.com/17082/a-safer-play-on-the-biotech-bonanza/

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

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

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

A very complex company with a wide range of difficult products headquartered in a very dangerous part of the world.

The recent FDA approval will remove a little bit of the uncertainty about this company's immediate future.

TEVA has often been tauted as a take-over candidate (e.g. by PG) but no company in it's right mind would take on such a complex task. I find the idea of PG taking over TEVA hilarious...will never happen.

http://www.kypost.com/dpps/money/bu...says-acquisition-is-logical-next-step_8377406

TRADE:
With TEVA at 39.37
JAN 30/37.5 bull call spread for a net debit of $625

Price.....................P/L
25......................(625)
30......................(625)
35......................(106)
36.25...................0.0
37.5....................125
39.37..................125
40.......................125
45.......................125
 
BA:
http://finance.yahoo.com/news/boeing-finishes-787-testing-focus-000051308.html
http://finance.yahoo.com/q/bc?s=BA&t=5y&l=on&z=l&q=l&c=


Looking for a 5 point bull put spread with at least 95% prob of success:
Month.........days............Spread............Yield..............%..............Ann................Prob
May..............41...............75/70..............$19.............3.9%..........34.7%.............97%
Jun................76..............70/65..............$12.............2.5%..........12.0%.............98%
Aug...............132.............70/65..............$30.............6.4%...........17.7%............95%
Nov...............223.............65/60..............$36.............7.8%...........12.8%............95%
Jan'14............286..........62.50/57.50.........$36.............7.8%...........9.95%............95%
Jan'15............650.............50/45...............$41.............8.9%...........5.0%.............96%

Aug is my preferred
 
UTX:

http://www.reuters.com/article/2013...eedType=RSS&feedName=globalMarketsNews&rpc=43

http://www.forbes.com/sites/chuckca...self-for-accelerated-growth/?partner=yahootix

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

http://finance.yahoo.com/q/bc?t=2y&s=UTX&l=off&z=l&q=l&c=&ql=1

Trade:

Jan '14 70/65 Bull Put Spread for a net credit of $41
Yield = 41/459 = 8.9% in 284 days or 11.5% annualized
Prob = 96%
Expectation = .96(41) - .02(459) - .02(229) = 39.4 - 9.2 - 4.6 = 25.6

Note: I'm not adding any bullish positions right now because of the extreme '''overbought'' state of the market and of UTX... but I am keeping this in mind should an orderly pull back allow me to add a position like this in the near future.

BTW: I held a year long position in UTX from Jan 2012 to Jan 2013 which allowed me to net a 12% annualized return on an very low risk, no maintainance trade.
 
JCP:

http://finance.yahoo.com/news/penney-ceos-challenge-even-fixable-203309975.html

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

http://finance.yahoo.com/q/bc?s=JCP&t=3m&l=off&z=l&q=c&c=

Trade:
With JCP at 13.93:
Buy Nov $15 put and sell Nov $10 put for a net debit of $242

Price..................P/L
8.....................258
10...................258
12....................53
12.58................0.0
14...................(140)
15...................(242)
16...................(242)
18...................(242)

Biggest danger to this trade is probably a takeover. e.g. it could be taken private at above 12.58 a share... otherwise $10 seems inevitable
 
Re JCP, I don't know if they have large insider-type holders like SHLD or BBY, but if they do, you might be surprised at how long it takes a sick company to die.
 
TLT:

http://finance.yahoo.com/news/long-term-treasury-bond-etf-233410597.html

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

"Now, with a disappointing March U.S. jobs report, weakening global sentiments and Eurozone financial strains, investors are again returning to the Treasury bond market in the second quarter, showing huge confidence with respect to this asset class."

It's hard to buy treasuries when they are priced so high. If you buy long term treasuries today they are going to yield less than 3%.

However...IF you are willing to commit to a long term trade you can get over 6% by using options:

Trade:
With TLT at 119.91
Sell the Jan '15 95 TLT put and buy the Jan '15 90 TLT for a net credit of 56$
Actual Yield = 56/444 = 12.6% in 645 days or 12.6(365/645) = 7.13% annualized.
Prob = 93.9%
Expectation = .939(56) - .03(444) - .031(222) = 52.6 - 13.3 - 6.0 = 33.3
Expected yield = 33.3/444 = .075 = 4.2%

As always the spread also has limited capital loss on the downside and caps gain on the upside. I believe we are at such a high valuation of treasuries that there is much more downside risk than upside opportunity:

.........................Capital P/L..................
Price................TLT................Spread
80.................(3991)................(444)
85.................(3491)................(444)
90.................(2991)................(444)
95.................(2491)..................56
100...............(1991)..................56
105...............(1491)..................56
110................(990)...................56
115................(491)...................56
120...................9......................56
125.................509.....................56
130................1009....................56

(copied from another board)
 
BRCM:

http://www.cnbc.com/id/100632389

http://www.cnbc.com/id/100634745?__source=yahoo|headline|quote|text|&par=yahoo

http://finance.yahoo.com/news/qualcomm-reverts-neutral-203002215.html

http://blogs.barrons.com/techtrader...gulating-yahoo-apple-google/?mod=yahoobarrons

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

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

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

Trade:

Aug 40/43 bear call spread for a net credit of $25
Yield = 25/275 = 9.1% in 127 days or 26% annualized
Prob = 85%
Expectation = .85(25) - .07(275) - .08(138) = 21.3 - 19.2 - 11 = -9

Compared to:

SMH:
http://finance.yahoo.com/q/bc?t=2y&s=BRCM&l=on&z=l&q=l&c=SMH&ql=1

Nov 40/43 bear call spread for a net credit of $25
yield = 9.1% in 218 days or 15.2% annualized
Prob = 81%
Expectation = .81(25) - .08(275) - .11(138) = 20.2 - 22 - 15 = -17
 
CYS:
http://blogs.barrons.com/incomeinve...n-as-compelling-investments/?mod=yahoobarrons

http://seekingalpha.com/article/132...e-11-yield-low-capital-loss-risk?source=yahoo

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

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

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

CYS pays a 10.8% dividend.

Trade:
With CYS at 12.20

Sell the Sept $12 put for a credit of $60

Yield = 60/1140 = 5.3% in 160 days or 12% annualized.

I intend to be put CYS and hold it for the dividend plus covered calls. If not put I will repeat the naked short put.
 
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