Dear Fuchi,
I took a look at Lombard's option montage regarding INTC and took a little time to relax in order to arrange the following trading play:
You told me You bought 20 Intel APR 105 PUTS @ 1/4 last week, since You are obviously bearish on goliath - at least AFTER April 2nd but definitely BEFORE INTC's quarterly earnings are annonced. However, IMHO this is quite risky (call it "gamble" <G>), since the stock has to fall at least 12% in order to generate handsome profit for you (I include a little time value. For intrinsic value above zero, INTC would have to fall approx. 20%).
In comes - again - a combined option position that would be profitable for You - even if INTC just stays were it is - @ 130 $, while at the same time limiting Your downside risk.
Consider this:
1) BUY a CALL INTC APR 145 for a cheap position - insurance (e.g. limits Your downside risk) - should cost below $ 1 1/2
2) SELL a CALL INTC APR 130 to COLLECT the huge option premium -> approx. $ 7 (use intrady trading volatility to maximize the inflow)
3) BUY a PUT INTC APR 125 below $ 3 (again use intraday volatility to minimize the expenditure)
This combined position is PROFITABLE if Intel just stayed flat @ 130 $.
Let's assume you invested into 10 Lots of this position:
Characteristics:
MARGIN Requirements for this Position: 30% of (145 -130) = $ 4,5 per Lot of position = 4,5 * 10 (lots) * 100 (option contract size) => total $ 4500
MAXIMUM Loss: if INTC rises to 145 OR ABOVE = $ 12,5 per Lot of position => $ 12500
PAYOFF: (at expiry)
INTC @ 130: 7 - 1 1/2 - 3 -> 2,5 per Lot -> 2500 $ total (!) PROFIT
INTC @ 125: 7 - 1 1/2 - 3 -> 2,5 per Lot -> 2500 $ total (!) PROFIT
INTC @ 120: 7 + 5 - 1 1/2 - 3 -> 7,5 per Lot -> 7500 $ total PROFIT
INTC @ 115: -> 12500 $ total PROFIT
INTC @ 110 -> 17500 $ total PROFIT
INTC @ 105 -> 22500 $ total PROFT
INTC @ 135: 2500 $ LOSS
INTC @ 140: 7500 $ LOSS
INTC >= 145: 12500 $ LOSS
This is far more safe than buying LONG PUTS on INTC, however You need more funds to execute this strategy.
Greetings,
CROSSY |
