SWHC: http://finance.yahoo.com/news/smith-wesson-beats-street-1q-202431851.html http://www.msn.com/en-us/money/stockdetails/fi-126.1.SWHC.NAS?symbol=SWHC&form=PRFIEQ http://stockcharts.com/h-sc/ui?s=swhc Trade: with SWHC at 16.22 Jan 13/10 bull put spread for a net credit of $40 Yield = 40/260 = 15.4% in 141 days or 40% annualized Prob = 70% Expectation = .7(40) - .10(260) - .2(130) = 28 - 26 - 26 = -24 Price............. Profit / Loss........... ROM % 7.50.................. (260.00)............. -86.67% 8.00.................. (260.00).............. -86.67% 10.00................ (260.00).............. -86.67% 12.53.................... (6.70)................ -2.23% 12.60..................... 0.00................... 0.00% 13.00.................... 40.00................. 15.43% 15.00.................... 40.00................. 15.43% 17.00.................... 40.00................. 15.43% 20.00.................... 40.00................. 15.43%
Entering bullish put spreads is probably lower risk at this point plus premiums are still pumped up from the recent drops.
This trade makes a couple of assumptions: 1. The bottom has been put in on the market turbulence. http://stockcharts.com/h-sc/ui?s=spy 2. SWHC's earnings beat will serve to carry the stock through Jan 3. The 13 strike provides a short term support level for the stock I must also admit I had a recent exposure to the S&W Shield and liked it very much and think it provides some traction for S&W against Glock. The one negative is that Walmart has decided to end sales of 'assault style' weapons which will take SWHC's version of the AR15 off their shelves. I don't know the effect this will have on SWHC's earnings but am assuming it will not be visible prior to Jan. http://www.nytimes.com/2015/08/27/b...ales-of-assault-rifles-in-us-stores.html?_r=0
I am new to this thread. Do you mind explaining what does Expectation means? I guess the .7(40) means 70% of gaining the credit of $40; 10% of 260 (Risk or Margin)? Why 10%? Delta 10? Last one .2(130), totally no clue.
OP explained it here. 70% chance of hitting max profit, 10% chance of max loss, 20% chance of price landing in between strikes. It's a 3 point version of expectancy, well described on the internet. The probabilities come from a formula that uses volatility. Many brokers have calculators for it.
GAS: http://finance.yahoo.com/news/southern-co-gain-12b-agl-200008659.html http://www.investopedia.com/stock-a...llion-acquisition-gas-so.aspx?partner=YahooSA http://www.msn.com/en-us/money/stockdetails/fi-126.1.SO.NYS?symbol=SO&form=PRFIEQ http://www.msn.com/en-us/money/stockdetails/fi-126.1.GAS.NYS?symbol=GAS&form=PRFIEQ http://stockcharts.com/h-sc/ui?s=gas Trade: With GAS at 60.56 Apr 60/55 bull put spread for a net credit of $100 Yield = 100/400 = 25% in 230 days or 40% annualized (with acquisitions probability and expectation cannot be meaningfully computed from price distribution) Price................ Profit / Loss............... ROM % 45.00.................... (400.00).................. -75.00% 50.00.................... (400.00).................. -75.00% 54.82.................... (400.00).................. -75.00% 55.00.................... (400.00).................. -75.00% 59.00......................... 0.00...................... 0.00% 60.00...................... 100.00.................... 25.00% 65.00...................... 100.00.................... 25.00% 70.00...................... 100.00.................... 25.00% 75.00...................... 100.00.................... 25.00%
HCP http://finance.yahoo.com/news/hcp-witness-upswing-accretive-investments-184006408.html http://www.msn.com/en-us/money/stockdetails/fi-126.1.HCP.NYS?symbol=HCP&form=PRFIEQ http://www.nasdaq.com/article/commi...750-earn-64-annualized-using-options-cm509836 http://www.marketwatch.com/story/5-...orever-investments-2015-06-25?link=MW_popular http://finance.yahoo.com/echarts?s=HCP+Interactive#{"range":"5y","allowChartStacking":true} Trade: with HCP at 37.70 Sell jan 32.50 put for $70 Yield = 70/3180 = 2.22% in 138 days or 5.8% annualized trade intends to be put at 32.50 (should it get there)
AAPL: http://finance.yahoo.com/news/apple-shares-slump-as-new-products-fail-to-surprise-220847161.html http://finance.yahoo.com/echarts?s=AAPL+Interactive#{"range":"2y","allowChartStacking":true} Trade: Jan 17 145/150 bear call spread for a net credit of $95 Yield = 95/405 = 23.5% in 498 days or 17.2% annualized Prob = 80% Price............. Profit / Loss.......... ROM % 90.00................. 95.00................. 23.50% 100.00............... 95.00................. 23.50% 125.00............... 95.00................. 23.50% 145.00............... 95.00................. 23.50% 145.12............... 82.90................. 16.58% 145.95................. 0.00................... 0.00% 150.00............ (405.00)............... -81.00% 166.31............ (405.00)............... -81.00% 187.50............ (405.00)............... -81.00%