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Strategies & Market Trends : Option Spreads, Credit my Debit
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To: jjs_ynot who wrote (1396)4/27/2000 11:30:00 PM
From: KFE  Read Replies (3) of 2317
 
Dave,

Just returned from a week of golf in Palm Springs and it doesn't look like I missed much in the market. Before I left I wrote a straddle on CEGE which I had purchased earlier in the week. I won't use my numbers because I don't like to post trades that are not real time. Using the closing bid/asked prices today I will analyze different possible similar trades.

CEGE: 16 3/8
Oct 17.5 call: 5-5 3/8
Oct 17.5 put: 5 1/2-6

Buy stock write 17.5 straddle
Return: 70% for less than 6 months if stock finishes at or above 17.5
64% if stock remains the same.
Breakeven: 11 3/4

write naked put (long stock and short straddle is equivalent of two naked puts)
Return: 63% for less than 6 months if stock finishes at or above 17.5 (assuming 50% collateral deposited-if using 10% minimum the returns are obscene)
50% if stock remains the same.
Breakeven: 10 7/8

buy stock write covered call
Return: 37% if stock finishes at 17.5 or higher.
30% if stock remains the same
Breakeven: 11 3/8

Note: The stock has $7.50 a share in cash and has an equity stake in ABGX worth another $11 a share so the downside should be limited. Traded at over $60 in March. A Biotech with value... maybe that is why it is down at these levels.

Regards,

Ken

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