Option Investor
Newsletter

Initial MCM December Recommendations 11-13-06

HAVING TROUBLE PRINTING?
Printer friendly version

We are recommending the following five (5) credit spreads for our DECEMBER RECOMMENDATED List

We are recommending credit spreads in the following issues:

LM - Legg Mason is a global asset management firm headquartered in Baltimore, Maryland. Through its subsidiaries, Legg Mason's sole business is asset management, with on-the-ground asset management capabilities located around the world.

GENZ - Genzyme Corporation is a global biotechnology company dedicated to making a major positive impact on the lives of people with serious diseases. The company's broad product portfolio is focused on rare genetic disorders, renal disease, and osteoarthritis, and includes an industry-leading array of diagnostic products and services

WBMD - WebMD a provider of online and offline medical education and promotion aimed at individuals, physicians and other healthcare professionals

VRFX - Vertex Pharmaceuticals Inc. discovers, develops and markets small molecule drugs that address major unmet medical needs. The company has eight drug candidates in clinical development to treat viral diseases, inflammation, cancer, autoimmune diseases and neurological disorders

AAPL - Apple Computer, Inc. designs, manufactures and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers.

We are recommending the following specific credit spreads:

Call credit spreads


LM $91.90

BUY LM-LA LM DEC $105.00 CALL DEBIT = $0.20
SELL LM-LT LM DEC $100.00 CALL CREDIT= $0.55
NET CREDIT = $0.35
 

INITIAL "NET- CREDIT TARGET= $0.35 or $35.00
POTENTIAL PROFIT (x 10 CONTRACTS @ $0.35 = $350.00
MARGIN REQUIRE. (x 10 CONTRACTS $4,650.00
RETURN ON INVESTMENT= 7.53%

EXIT STRATEGY =1. WATCH LIST 2. MAXIMUM LOSS SPREAD PRICE DIFFERENCE
1. STOCK WILL BE PLACED ON WATCH LIST IF STOCK PRICE RISES TO: $95.50
2. EQUITY INDEXES A STOP LIMIT will be placed on the SHORT STRIKE PRICE on any EQUITY OPTION that has a STRIKE PRICE DIFFERENCE OF $5.00 or ORE.
THE STOP LIMIT ON THIS POSITION IS NOTED BELOW:
BUY POSITION STOP BELOW
LM-LT EXIT >> = $2.20 STOP LIMIT
If and when the STOP LIMIT IS EXECUTED - A contingency order should be in place to then SELL the LONG SIDE of the Spread and close the position with a Market Order if and when the SHORT side needs to be STOPPED OUT


GENZ $65.82

BUY GAA-LV GENZ DEC $72.50 CALL DEBIT = $0.25
SELL GZQ-LN GENZ DEC $70.00 CALL CREDIT= $0.50
NET CREDIT = $0.25
 

INITIAL "NET- CREDIT TARGET= $0.25 or $25.00
POTENTIAL PROFIT (x 10 CONTRACTS @ $0.25 = $250.00
MARGIN REQUIRE. (x 10 CONTRACTS $2,250.00
RETURN ON INVESTMENT= 11.11%

EXIT STRATEGY = 1. WATCH LIST 2. MAXIMUM LOSS SPREAD PRICE DIFFERENCE
1. STOCK WILL BE PLACED ON WATCH LIST IF STOCK PRICE RISES TO: $67.50
2. ON SPREADS WITH 2.50 or less difference in STRIKE PRICES
THOSE POSITIONS. THEY WILL GO ON THE WATCH LIST AND BE FOLLOWED WITH INSTRUCTIONS
AS TO HOW TO PROCEED OR/WHAT EXIT POINT NEEDS TO BE ESTABLISHED

WBMD $37.69

BUY QWB-LI WBMD DEC $45.00 CALL DEBIT = $0.30
SELL QWB-LH WBMD DEC $40.00 CALL CREDIT= $0.85
NET CREDIT = $0.55
 

INITIAL "NET- CREDIT TARGET= $0.55 or $55.00
POTENTIAL PROFIT (x 10 CONTRACTS @ $0.55 = $550.00
MARGIN REQUIRE. (x 10 CONTRACTS $4,450.00
RETURN ON INVESTMENT= 12.36%

EXIT STRATEGY = 1. WATCH LIST 2. MAXIMUM LOSS SPREAD PRICE DIFFERENCE
1. STOCK WILL BE PLACED ON WATCH LIST IF STOCK PRICE RISES TO: $38.75
2.EQUITY INDEXES A STOP LIMIT will be placed on the SHORT STRIKE PRICE on any EQUITY OPTION that has a STRIKE PRICE DIFFERENCE OF $5.00 or MORE.

THE STOP LIMIT ON THIS POSITION IS NOTED BELOW:
BUY POSITION STOP BELOW
QWB-LH EXIT >> = $2.00 STOP LIMIT
If and when the STOP LIMIT IS EXECUTED - A contingency order should be in place to then SELL the LONG SIDE of the Spread and close the position with a Market Order if and when the SHORT side needs to be STOPPED OUT

Put credit spreads

VRTX $42.12

SELL VQR-XG VRTX DEC $35.00 PUT CREDIT= $0.70
BUY VQR-XF VRTX DEC $30.00 PUT DEBIT $0.30
NET CREDIT = $0.40
 

INITIAL "NET- CREDIT TARGET= $0.40 or $40.00
POTENTIAL PROFIT (x 10 CONTRACTS @ $0.40 = $400.00
MARGIN REQUIRE. (x 10 CONTRACTS $4,600.00
RETURN ON INVESTMENT= 8.70%
EXIT STRATEGY = 1. WATCH LIST 2. MAXIMUM LOSS SPREAD PRICE DIFFERENCE $5.00
1. STOCK WILL BE PLACED ON WATCH LIST IF STOCK PRICE DROPS TO: $35.00
2.EQUITY INDEXES A STOP LIMIT will be placed on the SHORT STRIKE PRICE on any EQUITY OPTION that has a STRIKE PRICE DIFFERENCE OF $5.00 or MORE.
THE STOP LIMIT ON THIS POSITION IS NOTED BELOW:
VRTX POSITION STOP BELOW
VQR-XG STOP LIMIT EXIT >> = $2.00
If and when the STOP LIMIT IS EXECUTED - A contingency order should be in place to then SELL the LONG SIDE of the Spread and close the position with a Market Order if and when the SHORT side needs to be STOPPED OUT

AAPL $83.12

SELL QAA-XO AAPL DEC $75.00 PUT CREDIT= $0.55
BUY QAA-XE AAPL DEC $72.50 PUT DEBIT $0.35
NET CREDIT = $0.20
 

INITIAL "NET- CREDIT TARGET= $0.20 or $20.00
POTENTIAL PROFIT (x 10 CONTRACTS @ $0.20 = $200.00
MARGIN REQUIRE. (x 10 CONTRACTS $2,300.00
RETURN ON INVESTMENT= 8.70%
EXIT STRATEGY = 1. WATCH LIST 2. MAXIMUM LOSS SPREAD PRICE DIFFERENCE $2.50
1. STOCK WILL BE PLACED ON WATCH LIST IF STOCK PRICE DROPS TO: $79.00
2. ON SPREADS WITH 2.50 or less difference in STRIKE PRICES the Difference
IN THE STRIKE PRICE WILL BE OUR MAXIMUM EXPOSURE - WE WILL NOT USE STOPS ON THOSE POSITIONS. THEY WILL GO ON THE WATCH LIST AND BE FOLLOWED WITH INSTRUCTIONS AS TO HOW TO PROCEED OR/WHAT EXIT POINT NEEDS TO BE ESTABLISHED



Orders to purchase or sell securities through your account with optionsXpress, Inc., an independent registered broker-dealer ("optionsXpress"), shall be accepted and executed solely by optionsXpress, subject to the terms and conditions of your individual account agreement with optionsXpress. optionsXpress makes no investment recommendations and does not provide financial, tax or legal advice. All inquiries regarding your optionsXpress account, including any disputes or trading errors, should be directed to optionsXpress. Option Investor, Inc is not a registered broker-dealer and is not in the business of transacting trades. Furthermore, Option Investor, Inc is not a registered investment adviser, does not provide financial, tax or legal advice, and is not recommending that you buy or sell any particular security. optionsXpress has made its services available to you via Option Investor, Inc as a courtesy. optionsXpress and Option Investor, Inc are separate and unrelated entities. optionsXpress is not affiliated with and does not endorse or warrant the products or services of Option Investor, Inc.

Monthly Cash Machine Newsletter Archives