WM: http://www.cnbc.com/id/100680314?__...wms-earnings-miss-estimates-1q-164001779.html http://finance.yahoo.com/q/ks?s=WM+Key+Statistics http://investing.money.msn.com/investments/financial-statements?symbol=WM http://finance.yahoo.com/q/bc?t=5y&s=WM&l=off&z=l&q=l&c=&ql=1 http://finance.yahoo.com/q/bc?s=WM&t=2y&l=off&z=l&q=l&c= TRADE: Jan '14 33/28 Bull put spread for a net credit of $25 Yield = 25/475 = 5.3% in 265 days or 7.2% annualized Prob = 95% Expectation = .95(25) - .01(475) - .04(237) = 23.75 - 4.75 - 9.48 = 9.52
HUM: http://finance.yahoo.com/news/humana-reports-strong-1q-earnings-155502614.html http://news.investors.com/business/...t-quarter-earnings-beat.htm?ven=yahoocp,yahoo http://finance.yahoo.com/q/ks?s=HUM+Key+Statistics http://investing.money.msn.com/investments/financial-statements?symbol=hum http://finance.yahoo.com/q/bc?s=HUM&t=2y&l=on&z=l&q=l&c= http://stockcharts.com/h-sc/ui?s=HUM Trade: NOV 62.50/57.50 bull put spread for a net credit of $60 Yield = 60/440 = 13.6% in 196 days or 25.4% annualized Prob = 84% Expectation = .84(60) - .07(440) - .09(220) = 50.4 - 30.8 - 19.8 = 0 (to get a positive expectation back the spread off either in time or price to get a lower % yield)
HUM: Ctd. Humana is down for a second day today: http://stockcharts.com/h-sc/ui?s=hum after earnings reported on Wednesday. http://finance.yahoo.com/news/humana-reports-strong-1q-earnings-155502614.html http://finance.yahoo.com/q/bc?s=HUM&t=2y&l=on&z=l&q=l&c= With the decline put options are increasing in price, and while HUM may indeed continue to decline I decided to make the plunge, albeit at a lower price and lower risk: Trade (as filled): Nov 57.5/55 bull put spread for $25. Yield = 25/225 = 11.1% in 195 days or 21% annualized Prob = 91% Expectation = .91(25) - .05(225) - .04(112) = 22.75 - 11.25 - 4.48 = 7.02 Oh good.... by backing off I got a higher expectation as I said I would above.
Hi, oldnemesis Would you please help elaborate how do you get the 0.04 below? I read earlier post, it is for half way down between 57.5 and 55. And the delta or probability is around 7-8%. Appreciate your help! -fpga Expectation = .91(25) - .05(225) - .04(112) = 22.75 - 11.25 - 4.48 = 7.02 Oh good.... by backing off I got a higher expectation as I said I would above.
Hi, oldnemesis I guess you are using the probability between 57.5 and 55? If so, that will make sense. Thanks! -fpga Expectation = .91(25) - .05(225) - .04(112) = 22.75 - 11.25 - 4.48 = 7.02 Oh good.... by backing off I got a higher expectation as I said I would above.
TSRX: http://www.cnbc.com/id/100707074?__source=yahoo|finance|headline|headline|story&par=yahoo&doc=100707074|Cramer%27s+Home+Work:+A+New http://seekingalpha.com/article/139...-trius-creates-an-entrance-point?source=yahoo http://finance.yahoo.com/news/zacks-recommends-trius-therapeutics-153500769.html http://finance.yahoo.com/q/bc?s=TSRX&t=2y&l=on&z=l&q=l&c= Trade: with TSRX at 6.50 buy the Dec 5/7.50 bull call spread for a net debit of $135 Price...................P/L 5.00..................(135) 6.50.....................15 7.00.....................64 7.50....................115 9.00....................115 10.00..................115 fpga: yes... you have figured out how I do the expectation estimate. congrats.
AAPL: With AAPL at $450 http://online.barrons.com/article/SB50001424052748703591404578453031263334260.html?mod=BOL_hpp_dc http://online.barrons.com/article/SB126091970802092803.html http://finance.yahoo.com/q/bc?s=AAPL&t=5d&l=on&z=l&q=l&c= http://finance.yahoo.com/q/bc?s=AAPL&t=2y&l=on&z=l&q=l&c= Trade: Sell the Jan '14 325 put and buy the Jan '14 320 put for a net credit of $40. Yield = 40/460 = 8.7% in 257 days or 12.3% annualized Prob = 93.7% Expectation = .937(40) - .054(460) - .01(230) = 37.48 - 24.84 - 2.30 = 10.34 note: If you are doing spreads on slim resources you need to allow for the possibility that AAPL suffers a disaster and that you are put the stock at $325. A hundred shares will require $32,500 to buy at that price. Be sure what will happen to your account in such an eventuality.
Hi,oldnemesis, Thanks for the confirmation! The question I have is when do you decide to enter the trade? I can find positive expectancy spread using something like SPY now using the formula. But I do not think you will just based on expectancy, right? Thanks for your answer! -fpga
Low Implied Volatility: Looking for trades for the week and coming up empty. (Except for the stupid AAPL trade above) e.g. In 2012 I sold the 17.50 CWT put three times, each time with 4 months worth of theta on it, for $80, $60 and $100. http://finance.yahoo.com/q/bc?t=5y&s=CWT&l=off&z=l&q=l&c=&ql=1 Today the 133 day CWT put (Dec) will net me $20. Not worth the risk. This is proving true all across my low risk stocks. Can't construct a decent positive expectation trade. What we need is a good disaster to kick the market into gear. Or maybe it's just time to 'go away in may'. I could sell snow cones at the pool... fpga: No I do not enter a trade based on expectation. The expectation calculation is simply a last minute check to see that the trade is not idiotic.
[note: If you are doing spreads on slim resources you need to allow for the possibility that AAPL suffers a disaster and that you are put the stock at $325. A hundred shares will require $32,500 to buy at that price. Be sure what will happen to your account in such an eventuality. [/B][/QUOTE] Hi Dan I was always under the impression that the long leg of the spread would potect against this type of assignment, during any period befoe experation. I understand the long would be worthless on the last day but wouldn't it have value (long) if it occured befor the last day. (i recall this topic ,somewhat , -with you and putmaster ??) cheers john