R: http://finance.yahoo.com/news/ryder-system-shares-plunge-lower-170828474.html http://blogs.barrons.com/stockstowatchtoday/2012/06/22/ryder-rolls-downhill/?mod=yahoobarrons http://finance.yahoo.com/q/ks?s=R+Key+Statistics http://investing.money.msn.com/investments/financial-statements?symbol=R http://finance.yahoo.com/q/bc?s=R&t=5y&l=on&z=l&q=l&c= Trade: Nov 27.50/25 bull put spread for $25 Yield = 25/225 = 11.1% in 146 days or 28% annualized Prob = 98% Expectation = .98(25) - .01(225) - .01(112)= 24.5 - 2.25 - 1.12 = 21.13 at bottom next week
WMT: http://online.barrons.com/article/SB50001424053111903882904577474580851310156.html?mod=BOL_hpp_dc WMT at 67.30 Trade: Jan '14 47.50/45 bull put spread for $25 Yield = 25/225 = 11.1% in 573 days or 7.1% annualized Prob = 97% Expectation = .97(25) - .015(225) - .015(112) = 24.25 - 3.375 - 1.68 = 19.2 Expected Yield = 19.2/225 = 8.5% in 573 days or 5.4% annualized Trade: Jan '13 55/52.50 bull put spread for $15 Yield = 15/235 = 6.4% in 209 days or 11.2% annualized Prob = 96% Expectation = .96(15) - .02(235) - .02(117) = 14.4 - 4.7 - 2.34 = 7.36 Expected Yield = 7.36/235 = 3.1% in 209 days or 5.5% annualized Statistically the same trade a year apart
Trade: Sept 45/40 bull put spread for $20 Yield = 20/480 = 4.2% in 92 days or 16.5% annualized Prob = 95% Expectation = .95(20) - .01(480) - .04(240) = 19 - 4.8 - 9.6 = 4.6 ----------------------------------------------------------------------------------- Hi Dan I've been puzzlling over your 5 pt. spreads with 95% probability outcomes. I must be missing something in the calculations or i'm not doing them correctly ie. UNH A $20 return@100 trades yields $1900 (95 winners) A $480 loss in 5 trades (5%prob. ) cost ($2400) Loss woud be $500 with the 5 losing Trades? My conclusion would be that 5 pt. spreads have a greater risk than your 2or2.5 spreads Am i correct in this conclusion? Thanks john
<<< I've been puzzlling over your 5 pt. spreads with 95% probability outcomes. >>> Personally, I think statistical "probability outcomes" are somewhat meaningless. Such outcomes should be based more on common sense than a generic math formula. While the formula may be helpful in getting some vague general fluctuating idea, at that particular moment in time, common sense should have already given you a general idea of the likelihood of success. If not, you probably should not be doing the trade. Whether the numbers calculate out to 77% or 93% chance of success is less relevant than my own analysis. For example, assume all variables are the same on a 6 week naked put or credit spread, including 2 stocks that are both 13% otm. But one is trading no where near any kind of tech support, and the other is once again trading at it's multi tested level of tech support, per the 1 - 2 year chart. Given a limited bankroll, which trade would you rather initiate. I'd make the decision based on analysis and common sense, and pick the one at multi tested tech support,... not a coin toss of statistical probabily, based on where the stock happens to be trading at that moment in time. I'd also base it on a few basic fundamental criteria pertaining to the companies financial health. While such issues may not be very relevant in the world of option trading, I look at those criteria to evaluate whether a stock has the "potential to recover", if a bad market takes it down. I'm less inclined to panic sell, if i know I have not invested my cash in an over valued, DEBT LOADED piece of crap..... regardless of how limited the loss may be. % probability outcome formula's, can give investors a false sense of confidence. Nor do they speak to the likelihood of the stock recovering in a reasonable period of time, if a bad market suddenly takes it down. Initiating a trade based on a generic statistical outcome formula, is a "lazy and risky" substitute for thoughtful analysis and common sense. Those 95% probability outcome formulas really are meaningless. Better to go with 96%. << g>>
JNJ: http://beta.fool.com/jordobivona/20...oval/6019/?ticker=JNJ&source=eogyholnk0000001 http://articles.marketwatch.com/2012-06-20/industries/32331519_1_risperdal-j-j-wall-street-journal http://investing.money.msn.com/investments/financial-statements?symbol=jnj http://finance.yahoo.com/q/bc?t=5y&s=JNJ&l=on&z=l&q=l&c=&ql=1&c=^GSPC http://finance.yahoo.com/q/bc?s=JNJ&t=2y&l=on&z=l&q=l&c= Trade: JNJ @ 66.63 Jan '13 57.50/55 bull put spread for $21 Yield = 21/229 = 9.2% in 208 days or 16.1% annualized Prob = 94% Expectation = .94(21) - .02(229) - .04(115) = 19.74 - 4.58 - 4.6 = 10.56
TSLA: http://finance.yahoo.com/news/first-tesla-electric-sedans-hit-000437526.html http://www.forbes.com/sites/hannahe...the-first-tesla-model-s-car/?partner=yahootix http://www.bloomberg.com/news/2012-...to-apple-style-store-strategy.html?cmpid=yhoo http://finance.yahoo.com/q/bc?s=TSLA&t=2y&l=on&z=l&q=l&c= Trade: TSLA at 33.78 Jan'13 33/35 bull call spread for $100 net debit Yield @ TSLA >35 = 100% in 208 days Yield @ TSLA < 33 = (100%) BE at $34 Prob= N/A Expectation = N/A http://www.usatoday.com/news/health/2009-03-16-pinsky-quiz_N.htm http://www.youtube.com/watch?v=mQZmCJUSC6g
TEVA: http://finance.yahoo.com/news/court-backs-teva-patents-ms-154627306.html http://finance.yahoo.com/news/teva-copaxone-patent-litigation-decision-121343137.html http://finance.yahoo.com/news/teva-issues-2012-outlook-150029829.html http://finance.yahoo.com/q/ks?s=TEVA+Key+Statistics http://investing.money.msn.com/investments/financial-statements?symbol=TEVA http://stockcharts.com/h-sc/ui?s=teva http://finance.yahoo.com/q/bc?s=TEVA&t=5y&l=on&z=l&q=l&c= Trade: Dec 27.50/25 bull put spread for $12 credit Yield = 12/238 = 5.0% in 179 days or 10.3% annualized Prob = 96% Expectation = .96(12) - .01(238) -.03(119) = 11.5 - 2.4 - 3.6 = 5.5
CE: Someone on another thread is selling naked puts on CE for AUG. I'll look at CE as I ordinarily would and see what I get: http://www.cnbc.com/id/47861099?__source=yahoo|headline|quote|text|&par=yahoo I don't rule out a stock just because Cramer recommends it... some people do. http://finance.yahoo.com/q/pr?s=CE+Profile http://finance.yahoo.com/q/ks?s=CE+Key+Statistics (note beta = 1.91) http://investing.money.msn.com/investments/financial-statements?symbol=CE (note loss in 2004) http://finance.yahoo.com/q/bc?s=CE&t=5y&l=off&z=l&q=l&c=^GSPC (consistant with Beta) http://finance.yahoo.com/q/bc?t=5y&s=CE&l=off&z=l&q=l&c=&ql=1 Trade: Dec 22.50/20 bull put spread for $25 Yield = 25/225 = 11.1% in 178 days or 22.8% annualized Prob = 92% Expectation = .92(25) - .035(225) - .045(112) = 23 - 7.9 - 5.04 = 10.06 Positive expectation... but the stock has too high a beta for me to actually trade, and it looks like I might have a problem getting the 25 when only 20 is offered. At 20 my expectation would be 5.15 or half what it is if I get the 25. I need the 25 for safety reasons.
Actually I used to work as a bench chemist for a company much like CE... Rohm and Haas ... which was bought by Dow Chemical in 2009. A difficult and sometimes dangerous business. I remember the day I came back from lunch and my whole lab was blown out into the stairway. One of my co-workers miscalculated the proportions on an analysis. POOF Luckily he wasn't killed.
MON: http://www.forbes.com/sites/abrambr...-rises-35-topping-estimates/?partner=yahootix http://finance.yahoo.com/q/ks?s=MON+Key+Statistics {high beta} http://investing.money.msn.com/investments/financial-statements?symbol=mon http://finance.yahoo.com/q/bc?s=MON&t=5y&l=off&z=l&q=l&c=^GSPC http://finance.yahoo.com/q/bc?t=5y&s=MON&l=off&z=l&q=l&c=&ql=1 Trade: Jan '13 55/50 bull put spread for $30 Yield = 30/470 = 6.38% in 205 days or 11.4% annualized Prob = 96% Expectation = .96(30) - .015(470) - .025(235) = 28.8 - 7.05 - 5.9 = 15.9