PFE

http://finance.yahoo.com/news/pfizer-beats-q4-earnings-revenues-150003515.html

http://www.msn.com/en-us/money/tops...izer-earnings-not-ok-with-guidance/ar-BBp1pax

http://www.thestreet.com/story/1344...-on-2016-guidance.html?puc=yahoo&cm_ven=YAHOO

http://finance.yahoo.com/echarts?s=PFE+Interactive#{"range":"2y","allowChartStacking":true}

Trade:
#1
With PFE at 29.99
Jan '17 35/40 bear call spread for a net credit of $45
Yield = 45/455 = 9.9% in 353 days or 10.2% annualized
Prob = 78%
Expectation = .78(45) - .078(455) - .137(228) = 35.1 - 35.5 - 31.2 = -31.6

Price.................. Profit / Loss.......... ROM %
20.00..................... 45.00................... 9.90%
25.00..................... 45.00................... 9.90%
30.00..................... 45.00................... 9.90%
35.00..................... 45.00................... 9.00%
35.45...................... 0.00................... 0.00%
38.89................. (343.60)................ -68.72%
40.00................. (455.00)................ -90.10%
45.00................. (455.00)................ -90.10%
50.00................. (455.00)................ -90.10%

#2
With PFE at 29.95
Jan 17 23/28 bull put spread for a net credit of $45
Yield = 45/455 = 9.9% in 353 days or 10.2% annualized
Prob = 88%
Expectation = .88(45) - .01(455) - .11(228) = 39.6 - 4.55 - 25.08 = 9.97

Price....................... Profit / Loss.......... ROM %
13.00.......................... (455.00)............. -90.10%
15.00.......................... (455.00)............. -90.10%
18.10.......................... (444.90)............. -88.98%
22.55............................... 0.00................. 0.00%
22.94............................. 39.50................. 7.90%
23.00............................. 45.00................. 9.90%
27.00............................. 45.00................. 9.90%
32.00............................. 45.00................. 9.90%
35.00............................. 45.00................. 9.90%

Trade #2 has a much higher statistical expectation yet I prefer Trade #1... why is that??

 

Trade #1 is $5.00 OTM, while trade #2 is only $2.00 OTM. But I have a question - shouldn't the put premium be higher than the call premium?

 

I made an error in posting. The bull put spread should be 23/18 not 23/28

 

You are more neutral/bearish than neutral/bullish?

 

Great earnings. Great dividend. Great buyback. Lower tax bill and greater profit. And it's down. Ok. Time to buy. What a gift