Option trade on ADI

Discussion in 'Options' started by hajimow, Apr 23, 2010.

  1. hajimow

    hajimow

    I am doing the following trade on ADI for May.

    Sell 30 PUT , buy 30 CALL May , and sell 32.5 May
    You can do this trade for flat debit or the debit of 10 cents. The gain is 2.5 per set.

    ADI will announce the strong results on May 18 before option expiry day.

    I am not worried about naked 30 PUT.
     
  2. stoic

    stoic

    I'd say that looks like a reasonable trade to me.
    If ADI moves up sharply, the max profit would be about 30 to 35% based on the capital (option margin) requirement.

    The underlying looks to have had support @ 29
     
  3. hajimow

    hajimow

    Even if the shares are assigned which I give it a 2% chance, you will get 20 cents dividend before June option expiry (less than a month)

    For this Q ADI has predicted higher margin, 300% gain compared to the same Q last year (54 cents compared to 18 cents) and 12% Q to Q gain. Like other companies in the same sector, it will have a rosy next Q outlook.
     
  4. hajimow

    hajimow

    at 10:32 AM ET Friday the bid/ask are
    32.5 Call 0.21/0.29
    30 Call 1.05/1.15
    30 PUT 1.05/1.1

    Taking the mid points you can do this trade for

    +1.075 -1.1+0.25=0.22 Credit

    and you might make 2.5 max plus 0.22 =2.72

    You will start to lose at 29.78

    Commission is not included in this calculation.
     
  5. hajimow

    hajimow

    The fact that TXN will report on Monday April 26, will make ADI volatile for today and specially on Monday but everything should be on the rosy side considering that fact that we also expect a strong result from TXN.
     
  6. hajimow

    hajimow

    Up 25% in 2 days. Still is a good time to get in.
     
  7. hajimow

    hajimow

    Now at 11:23 Monday 4/26/10
    Call 32.5 0.46/049
    Call 30 1.60/175
    PUT 30 0.6/0.7

    If we take the middle points we have
    +0.65 +0.47-1.67=-0.55

    That is debit of 55 cents