Furrfu, the net equipment guys had their big slide today on downgrades. JNPR may drop some more, but the premium on the options are pretty big. You have to pay almost $4.00 for June JNPR 40 puts. That means the stock has to drop almost 10% more for you to just break even!
If you go to out-of-the money on JNPR, you have to pay $1.75 for June 35's. JNPR has to hit nearly $33 for you to just break even, a drop of almost 18% in about 2-weeks!
On the other hand, QQQ June 45's can be had for around $2.25. The QQQ last traded at 44.43. To break even, the QQQ has to drop to 42.75 in 2-weeks, which is only a 3-1/2% drop. We had that today. Furthermore, the bid/ask spread is not too great.
The risk/reward ratio is better right now with the liquid, heavily traded QQQ. That's why I like it.
Another good one if you are putting the SOXX is the SMH.
The June 45's are only about $2.00, making them attractive if the SOXX tests the lower end of the support at around 520.
Look at KKD (Krispy Kreme). It dropped $4.85 today to 70.75, and the 70's only went up a buck to $5.00. People were paying $4.00 to sell this stock at 70 when it was over $75.00!
If you are pretty certain of the general market direction, it is much safer to play the QQQ IMO than to risk the high premiums of a stock that may be influenced by a ton of external events. However, in a bull or bear rally, I like individual equities that are 3-4 weeks out. |
