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Associate Option Battle 10.2.2012

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Associate Jim

Trade: Buying 40 FDO Oct 60- 57.5 Put Spread for $0.25

Risk: $25 per 1 lot

Reward: $225 per 1 lot

Breakeven: $59.75

Notes: The stock has sold off hard twice in the past four quarters both after beating estimates. The stock has been rallying but I think it will test lower after earnings.

Associate Alex

Trade: Buying 4FDO strangle swap by buying the Nov 62.50 Put – 67.50 Call strangle and selling the Oct 62.50 Put – 67.50 Call strangle for a net debit of $2.45

Risk: $245 per 1 lot

Reward: Unlimited

Notes: I expect the stock to stay within the strangle till October expiration, making the strangle worthless, and then to continue the direction further into November.

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

Jim has B.S. in finance from University of Illinois Champaign-Urbana. 

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Associate Option Battle 9.25.2012

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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