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Strategies & Market Trends : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: EepOpp who wrote (198)	9/7/1998 2:53:00 PM
From: AurumRabosa	Read Replies (2) \| Respond to of 355

DELL butterfly spreads, both the long call butterfly and long put butterfly, look attractive. With the recent increase in implied volatility (78-83%) these look like good candidates for spread trades. DELL closed on 9/4/98 at $109.50 with the Sep 105 Call at $9.25 (buy 1), the Sep 110 Call at $6.75 (sell 2), and the Sep 115 Call at $4.50 (buy 1) to get a theoretical maximum profit of $468.00 and maximum loss of ($32.00). This assumes a $1.75 commission per option which means you'd almost have to be trading 10 contracts per leg, i.e. 10:20:10. The long put butterfly works out even better as it has the higher implied volatility. The Sep 105 Put closed at $4.875 (buy 1), the Sep 110 Put at $7.50 (sell 2), and the Sep 115 Put at $9.875 (buy 1) yielding a theoretical maximum profit of $518.00 and a minimum profit of $18.00. Surely the iron and gut iron versions work good as well, I'll take a look.