Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Calls and Puts for Income -- Ignore unavailable to you. Want to Upgrade?

To: Jim P. who wrote (5144)	6/17/2012 7:03:23 PM
From: CommanderCricket	Read Replies (1) \| Respond to of 5891

jim, I going to need to re-read your post several times. Interesting strategy and like the possibilities. Do you own any ATLS common or is this a strictly option play? What SD trades are you playing? Michael

To: Jim P. who wrote (5144)	6/18/2012 6:32:50 AM
From: dealmakr	1 Recommendation Read Replies (1) \| Respond to of 5891

"I sold Jan 2014 30 puts for $10.80 on ATLS in February this year and purchased 2x the number January 2014 25 calls for $5. Options now carry 100 shares of ATLS plus 10 shares of the spinoff ARP. After the stock spiked I sold January 2014 ATLS calls with out the ARP shares strike $45 for $2.55. " Hi Jim, By making this type of directional play if your investment thesis bears out, it should be a nice return. Using the premium received by selling the puts to fund a long call position is a nice way to participate on a stock that is perceived to be undervalued by your analysis and the risks have been defined by your put sale where if exercised you would know your costs. I got these numbers from the back of the envelope to try and figure the max possible return. Short 30 Jan 14 30 put 10.80 32400 (premium received) Long 60 Jan 14 25 Call 5 (30000) premium purchased Short 60 Jan 14 45 Call 15300 (premium received) Max return if stock ends up @ 45 on expiration 32400 from short puts 6000 x 15 from long calls 90000 (stock price of 25 + 5 option premium cost basis 30 & sold @ 45) 15300 from short calls total 137700 if maxed out with stock @ 45 at expiration With tax status up in the air at this time over the Bush tax cuts, it may pay to see what happens with LT/ST gains rates when things get sorted out. It could possibly pay off depending upon your income status to spread the closing out of the position if it reaches your goal over the 2013 & 2014 tax years and not take the tax hit in just 1 year. Of course this depends upon how the trade is working. Thanks for posting your trade. I like to see these type of directional plays and the thoughts that go into them as they can be very profitable if the analysis is correct. wasn't able to use the CBOE margin calculator for margin required on the short put sale, but it appears to be fairly reasonable. Good trading dealmakr