Bull Call Calendar – GRMN

Reasoning:
1) Technical indicators are showing sell signals and downward trend.

2) Fundamentals still strong. I don’t see much further downside.

3) Sentiment based on option pricing seems to be swinging to the bulls.

Expectation is for short term bearish movement. When thinking about this trade I wanted to do a married put but looked at how cheap the calls were and the risk reward characteristic was better than the married put. I shorted the call because of the excess premium so close to expiration as well as to optimize my short term bearish expectation. A potential addition to this trade is a few puts to hedge for earnings.

Entry Point:

BTO Jan ‘09 Long Call Strike 22.5 (Synthetic Married put)

STO Oct Short Call Strike 25

NET DEBIT of  $2.95

Exit Points:
Primary Exit (PE): Reduce cost basis to zero. Short term- Let short call expire worthless
Secondary Exit (SE):
Bullish: Roll short call.
Bearish: Roll long call when support is found.

Put Calendar on DIA

Reasoning:
1) Technical indicators are showing sell signals and downward trend.
2) Economic numbers are getting worse every month.

Expectation is for continued bearish movement over time. When thinking about this trade I was actually worried about my short put going ITM. I am doubtful this market will turn around and rally anytime soon. The whole world economy seems to be slowing down and there just is not enough money to inject into this market to create a bottom and restore confidence. At this point the economic numbers need to show signs of upward momentum.

Entry Point:

Nov/June’09 PUT CALENDAR SPREAD for a NET DEBIT of upto $2 @ strike $80.

Exit Points:
Primary Exit (PE): 40% ROI on the spread. (about 700-800 point drop further on the DJIA)
Secondary Exit (SE):
Bullish: Close trade at 50% loss.
Bearish: Roll short put for credit, or if too bearish for rolling, add more puts.