Trade idea on YHOO with great profit

Discussion in 'Options' started by hajimow, Oct 26, 2011.

  1. Sell PUT 15 for November on YHOO. The bid/ask are 0.43/0.44. . You will need $250 for each contract and the reward is about 17% in 3 weeks. You will start to lose money if YHOO drops below $14.60 which is highly unlikely.
  2. Small detail but you'll start to lose money right away if YHOO starts dropping - possibly never seeing break even. Unless, of course, the highly unlikely never occurs :)
  3. seems like a poor trade to me. yhoo was 11 in aug. since then its up on takeover speculation.
    if yhoo is taken over you make a lousy 43 cents. if takover speculation ends good chance it goes back to 11. risk reward is lopsided.
    if you are playing for a takover why give away the upside?
  4. lionline




  5. that "lousy" 43 cent is 17% !!

    Calls are expensive because of the speculation. Actually that is not speculation anymore. That is a fact now. If that deal does not happen by November, I will make another 17% for December. I did that for October. So by the time that deal happens, I might have doubled my money with less risk.
    Yes YHOO's 52 weeks low was 11 something and GOOG's is 470 and AAPL's is 293 and CSCO's is 13.30. That era (52 weeks low) is gone. Market will go up and specially YHOO will outperform.
  6. so if you know this why are you keeping all the risk and giving away all the upside for 43 cents?
  7. I dont understand, your risk reward ratio is skewed.

    Why not buy calls ?

  8. How do you know it's unlikely that YHOO will go below $14.60? Can you predict price direction?
  9. I did not say for sure. That is my prediction based on my experience and the info that I get from the market.

    Answers to other questions:

    Buying Call will be more profitable but you are buying time and selling PUT you are selling time. In PUT you have more cushin if the stock drops. I am doing this in a rather huge volume (over 200 contracts) so I should make good money if I am right.
    All things said, I agree that no trade is risk free. I did not say my trade is risk free. YHOO can go below 11 and even can go to zero. One of my early trades in the market was buying Bre-X mineral shares. Market veterans know what happened to it in 1998.

    By the way my average price on this trade is 0.65 and not 0.43
  10. Yes I know the basics but at what risk ?

    At least with the calls the risk is defined.

    #10     Oct 27, 2011