Conservative Options trades

Discussion in 'Options' started by danshirley, Oct 18, 2009.

  1. My stock universe for option trades:

    APOL, CHD, CL, CLX, GIS, JNJ, MCD, PBCT, RAH, SLGN, TEVA, WGL, WMT
     
  2. Sell the WGL 35P. Forget the buy-write.
     
  3. KAWill70

    KAWill70

    Yahoo Finance shows a volume of 6 calls last Friday for the April 35 2010 Calls. Last trade was $1.00.

    My spreadsheet shows the cash flow or return for the unexercised and exercised cases. I believe the dividend is now $0.3675.

    I show cash flow including dividends of 5.12% if not exercised, or a return of 8.36% if exercised.

    WGL certainly held up well in 2008. Very low risk investment.

    Kent
     
  4. Short WGL 35 put will yield: 175/3215 = 5.44% in 181 days or 10.8% annualized. The dividend puts the small advantage to the CC.
     
  5. The covered write has a cost of carry and the dividends have a present value. Adjust for that and the CC and short put will be much closer to an identical return.
    If you have resting SMA and pay no transaction costs the will always line up. When you pay transaction costs the put has a higher return
     
  6. Dividends and carry cost are priced into the options.

    Your April cost basis will be $32.00 via the covered call. The cost basis of the April naked put shares will be $32.15

    The naked put writer collects 1% on his $3,270 for 6 months. That's about $15 so it's a wash. If anything, the advantage goes to the put writer who has potentially fewer commissions and slippage to deal with.
     
  7. I have a near risk-less trade, the only risk is interest rates. Get your jelly rolls ready, here it is.

    +1 NDX DEC09 1725 CALL
    -1 NDX NOV09 1725 CALL
    For a credit of 19.65

    -1 NDX DEC09 1725 CALL
    + NDX DEC09 1725 CALL
    For a debit of 19.65
     
  8. lol, ok. Long the time spread.
     
    #10     Oct 18, 2009