hey im new to options but I was thinking about Jan 09 110 BA Calls. I think the weak US dollar can only help international orders while the cheap interest rates/ airline consolidation will spur domestic orders. I also think that if NWA merges with DAL or CAL they are going to place a major order for 737's to replace the very aged DC9 fleet. (DAL, CAL, and AAL have gentelmens agreements with boeing I belive for 20 years when it was signed, might be around 14 by now). People are already saying NWA is going to have to dump the majority of their DC 9's to even make them a desireable merger candidate. In addition I believe that many of the US airlines are on the brink of placing sizable 787 orders once they can find the capital or consolidate. All of this is in addition to international orders due to relatively cheap US exports. I could always buy the stock, but I thought id give options a try with somthing im pretty confident in, plus I dont want to tie up to much capital at the moment (I'm in college). The technical ML reports ive been getting have been hinting at a Dow bottom... "Just as the internal peak last summer preceded the divergences in October that led to a sell-off, the January internal low might be expected to precede positive divergences (in March-April?) prior to a rally This possibility is bolstered by the fact that NYSE weekly breadth recently recorded the highest number of advances in history (and a top 10 a/d ration). The combination of extereme oversold readings along with early evidence of a significant breadth improvement suggests that a test of the Jan lows will be a succsseful prelude to at least an intermediate rally". My concern obviously is the broader Macro economy and more 787 delays than are already priced in, but I figure $155 isnt that big a deal at all, plus it would give me a chance at basic options trading. In the short term to intermediate I think it will trade sideways and maybe inch up to low 90's, but by Jan 09 unless shit hits the fan I dont see 110 out of the realm. I also traded around on it last summer in the 90-105 range. Does anybody have any insight. I havent talked to any professionals so im trying to find out if im missing some fundamental oversight in options with this trade.
Just remember, that you'll pay 1.60 for each call and loose it if BA below 111.6 at expiration. With deep OTM options you have a slim chance of very high profits. Right now if BA gain 10 points you'll have a little less than 100% return on investment. Pros - your risk is defined, cons - the chance of wining is not very big and you can loose 100% of investment. You also will not recieve dividents, however that can be partially covered by putting the rest of the money in CD.