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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

 

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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.

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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.

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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.

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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.