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.

Inverted Collar – GRMN

Reasoning:
1) Market is so out of reason right now its giving free money.

Entry Point:

Sell short 200 shares GRMN @ $37

BTO 2 Nov 35 Call @ $3.60

STO 2 Nov 35 Put @ $3.50

Net Credit $36.90 and I will have either the obligation or right to buy GRMN back at 35 at Nov expiration

Exit Points:
Primary Exit (PE): Hold to assignment. Profit $1.90 per share minus commissions.
Secondary Exit (SE): I don’t know what I don’t know. If the SEC bans shorts on all stocks then this potentially could get ugly. But I would still have the right to exercise my call in that case. Assuming they don’t ban options too….

Bull Put on SLB

Reasoning:
1) Technical indicators are showing buy signals and the recent trend has been in a slight correction/consolidation.
2) Support at about 20 day EMA and this is a stock I would not mind owning shares of. Earnings is coming up on expiration day.

Expectation is for continued bullish movement, with bullish long term expectations based on fundamentals.

Entry Point:

Jul ’07 BULL PUT SPREAD for a NET CREDIT of $1.10 @ strikes 85/80.

Exit Points:
Primary Exit (PE): Let options expire worthless. May need to close short leg of trade before day of earnings if profitable to avoid losing profits.
Secondary Exit (SE):
Bearish: Add or roll long put in preparation to take assignment for collar.

Bull Put on RIMM

 

Reasoning:
1) Technical indicators are showing buy signals and the recent trend has been in a range.
2) Support at about 132.5 and this is a stock I would not mind owning shares of. Earnings is out of the way.

Expectation is for continued bullish movement to the 140-145 range with bullish long term expectations based on fundamentals.

Entry Point:

May ’07 BULL PUT SPREAD for a NET CREDIT of $0.70 @ strikes 135/130.

Exit Points:
Primary Exit (PE): Let options expire worthless.
Secondary Exit (SE):
Bearish: Add or roll long put in preparation to take assignment for collar.

ICE Covered Call

Reasoning:
1) Technical indicators are showing buy signals and looks like a cup and handle is forming.
2) Fundamentals are strong with this company thus long term expectation is bullish.

Entry Point:

Long stock plus May 145 short call for a NET DEBIT of 129.05.

Exit Points:
Primary Exit (PE): Covered Call expires worthless, short another call. Repeat until fundamentals change. Secondary Exit (SE):
Bullish: Will look to roll short call up and out.
Bearish: Convert to collar.

PUT CALENDAR ON SNDK

Reasoning:
1) Technical indicators are showing sell signals and downward trend.
2) Support recently broken with earnings.

Expectation is for continued bearish movement over time.

Entry Point:

March/June’07 PUT CALENDAR SPREAD for a NET DEBIT of upto $2 @ strike $37.50.

Exit Points:
Primary Exit (PE): 20% ROI on the spread.
Secondary Exit (SE):
Bullish: Will look to roll up short put and/or add call calendar
Bearish: Roll short put for credit or if too bearish for rolling, take assignment on short put and convert to collar.