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