Conservative Options Trades

INTC

http://finance.yahoo.com/news/intel-profit-line-q1-sales-224300040.html

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

Trade:
with INTC at 31.49
Oct 32/30 bear put spread for a net debit of 1.00
Yield = 100/100 = 100%
Prob = 46%
Price................. Profit / Loss........... ROI %
22.50.................. 100.00.................... 100.00%
25.00.................. 100.00.................... 100.00%
30.00.................. 100.00.................... 100.00%
31.00..................... 0.00........................ 0.00%
32.00................. (100.00)................. -100.00%
34.00................. (100.00)................. -100.00%
36.00................. (100.00)................. -100.00%
40.00................. (100.00)................. -100.00%

coin flip
 
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GSK:

http://finance.yahoo.com/news/glaxo-downgraded-strong-sell-delete-210509499.html

http://www.msn.com/en-us/money/stockdetails/fi-151.1.GSK.LON?symbol=GSK&form=PRFIEQ

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

Trade:
with GSK at 47.58
Nov 50/52.5 bear call spread for a net credit of $60
Yield = 60/190 = 31.6% in 217 days or 53% annualized
Prob = 65%
Expectation = .65(60) - .23(190) - .12(95) = 39 - 43.7 - 11.4 = -16.1

Price............... Profit / Loss......... ROM %
35.69................. 60.00.................. 31.60%
41.43................. 60.00.................. 31.60%
47.48................. 60.00.................. 31.60%
50.00................. 60.00.................. 31.60%
50.60.................. 0.00.................... 0.00%
52.50............... (190.00).............. -76.00%
53.53............... (190.00).............. -76.00%
59.58............... (190.00).............. -76.00%
65.63............... (190.00).............. -76.00%

Alt:
Nov 43/40 bull put spread for a net credit of $40
Yield = 40/280 = 14.3% in 217 days or 24% annualized
Prob = 75%
Expectation = .75(40) - .11(280) - .14(140) = 30 - 30.8 - 19.6 = -20.4

Price................. Profit / Loss.......... ROM %
30.00.................... (260.00)............ -86.67%
35.66.................... (260.00)............ -86.67%
40.00.................... (260.00)............ -86.67%
41.61.................... (98.90).............. -32.97%
42.60....................... 0.00.................. 0.00%
43.00...................... 40.00............... 14.33%
47.57...................... 40.00............... 14.33%
53.52...................... 40.00............... 14.33%
59.48...................... 40.00............... 14.33%
 
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oldnemesis said:
VZ:
http://blogs.barrons.com/incomeinve...st-buys-verizon-sells-att/?mod=BOL_hp_blog_ii

http://finance.yahoo.com/echarts?s=VZ+Interactive#{"range":"2y","scale":"linear"}

Trade:
With VZ at 48.9
Sell the Jan 2016 45 put for $164
Yield = 164/4336 = 3.78% in 272 days or 5.1% annualized
Prob = 73%
More...
This is what I get using IB Probability tool. How do you get that 73%? I know that you are not using IB but once you told me a couple of tools that you used, all gave the same results.
 

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On your curve what would be the probability that VZ would be at or above 45 at expiration??

This would be the probability of 'success' of the trade...actually I am willing to accept buying VZ at 45 and collecting the dividend...which is why I am selling the put naked rather than doing a spread.
 
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hajimow said:
This is what I get using IB Probability tool. How do you get that 73%? I know that you are not using IB but once you told me a couple of tools that you used, all gave the same results.
More...
IB doesn't really have a tool that spits out the probability of expiring OTM for a specific option. (At least not that I've found).

My own tool just uses the Black-Scholes formula and got the same OTM probability for the Jan 2016 45 put as oldnemesis. You just have to know the days to expiration (272), current stock price (48.9), strike price (45), stock historical volatility (0.15) and the risk free interest rate (0.01).
 
stevegee58 said:
IB doesn't really have a tool that spits out the probability of expiring OTM for a specific option. (At least not that I've found).

My own tool just uses the Black-Scholes formula and got the same OTM probability for the Jan 2016 45 put as oldnemesis. You just have to know the days to expiration (272), current stock price (48.9), strike price (45), stock historical volatility (0.15) and the risk free interest rate (0.01).
More...


Fundamentals are vital in this trades in my opinion, i care less about prob
 
stevegee58 said:
IB doesn't really have a tool that spits out the probability of expiring OTM for a specific option. (At least not that I've found).

My own tool just uses the Black-Scholes formula and got the same OTM probability for the Jan 2016 45 put as oldnemesis. You just have to know the days to expiration (272), current stock price (48.9), strike price (45), stock historical volatility (0.15) and the risk free interest rate (0.01).
More...
I found out the problem on why I was not getting 73% as oldnemesis was getting in my IB account. I noticed that when I move the curser on the horizontal bar (price line) in VZ chart, on 42, it prints out 43 and 44 is actually 45 (which is 44 on the chart) so when I added all the probabilities from the chart from 45 to infinity I got 72.7% which is close enough to 73%. I have attached the chart and you can see that the cursor reads 43 on 42
 

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IBM:
http://news.investors.com/042015-74...gs-beat.htm?ven=yahoocp&src=aurlled&ven=yahoo

http://www.msn.com/en-us/money/stockdetails/fi-126.1.IBM.NYS?symbol=IBM&form=PRFIEQ

http://finance.yahoo.com/echarts?s=IBM+Interactive#{"range":"2y","scale":"linear"}

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

Trade:
With IBM at 166.16
Jan 135/130 bull put spread for a net credit of $40
Yield = 40/460 = 8.7% in 269 days or 11.8% annualized
Prob = 85%
Expectation = .85(40) - .11(460) - .04(230) = 34 - 50.6 - 9.2 = -26

Price............ Profit / Loss........... ROM %
95.00................ (460.00)............. -92.00%
120.00.............. (460.00)............. -92.00%
130.00.............. (460.00)............. -92.00%
134.60................... 0.00................. 0.00%
135.00.................. 40.00................ 8.70%
140.00.................. 40.00................ 8.70%
160.00.................. 40.00................ 8.70%
185.00.................. 40.00................ 8.70%
200.00.................. 40.00................ 8.70%

Alt Trade:
Jan 195/200 bear call spread for a net credit of $38
Yield = 38/462 = 8.2% in 269 days or 11.2% annualized
Prob = 81%
Expectation = .81(38) - .15(462) - .04(231) = 30.78 - 69.3 - 9.24 = -48

Price...................... Profit / Loss............ ROM %
125.00....................... 38.00..................... 8.20%
150.00....................... 38.00..................... 8.20%
175.00....................... 38.00 .....................8.20%
195.00....................... 38.00..................... 8.20%
195.38........................ 0.00...................... 0.00%
199.34....................... (396.10).............. -79.22%
200.00....................... (462.00).............. -92.40%
225.00....................... (462.00).............. -92.40%
250.00....................... (462.00).............. -92.40%
 
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