Associate Option Battle 9.25.2012

Trade: Buying 8 Lots of BBY Oct 62.50 – 67.50 – 70.00 Iron Butterfly

Risk: $1.22 or $122 per one lot

Reward: $3.78 or $388 per one lot

Break Even: $63.72 (current price 62.36)

Why I like this trade: BBBY gapped down after a poor earnings trade. In the past, it has made up this gap eventually and I expect it to do the same here especially with strong consumer confidence. I like the iron butterfly because the call spread helps to pay for the put spread making my break even lower without any upside risk. Reward and Risk ratio is about 3:1.

Associate Jim’s Trade

Trade: Buying 25 Nov12 SPY 148-151-154 Call Fly for $.40

Risk: $40.00 per 1 lot

Reward: $260 per 1 lot

Breakevens: $148.40 and $153.60

I like this trade because I only have to pay $.40 for a chance at a $2.60 reward.  I think the market is going to grind higher throughout the rest of the year and this trade has a good risk v. reward setup.

Alex Kalish has a master’s degree in economics from Suffolk U.

Alex Kalish has a masters degree in economics from Suffolk U.

James Ramelli has a B.S. in finance from UIUC

 

Trade of the Day (SHFL) 9.10.2012

UPDATE 9.16.2012:  With a sell-off after Earnings, this stock has sold off and the Call Spread I sold has gone to $.10, good for a triple, but I will leave this trade on until Friday and hope it expires worthless.

UPDATE 9.21.2012  With the stock settling at $15.81, this Spread went out worthless, time to move to the next trade.

Trade of the Day (HALO) 9.6.2012

UPDATE 9.16.2012  With a nice rally higher, the October 5 Calls are worth $1.45, good for over 10% gains, but I am leaving them on as the chart looks strog.

UPDATE 9.21.2012  With the Stock moving up by over 28% today, these Calls went from $1.45 to $3.10 and good for 2.5 times my money.  I have NOT takin any profits off yet.

Trade of the Day (HOV) 9.5.2012

UPDATE 9.16.2012  The home builders continue to look strong, but I said that I will not take this position off until expiration, because I think the it is chopping myself up too much in commissions.  

Update 9.21.2012 This Put Spread is now worth $.05, but I am leaving this trade on until expiration.

Trade of the Day (NFLX) 9.4.2012

UPDATE 9.16.2012  With the Calls appreciating in value more than the Puts, this would turn this delta neutral trade into a slightly bullish trade, but I am looking to hedge out of it just yet.