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New Plays

New Option Plays

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Call Options Plays
Put Options Plays
Strangle Options Plays
None None DIA
    OEX

Play Editor's Note: The markets didn't move much today because everyone is waiting to hear what Fed chairman Bernanke will say tomorrow morning. The challenge for us is that whatever he says will either cause a big rally or a big sell-off. We've decided to add a couple of strangles to take advantage of any volatility. If you are currently in any bullish positions you will want to re-evaluate your risk and consider adjusting your stop loss before he starts speaking around 10:00 a.m. If we had to bet we'd expect him to disappoint the market.


New Calls

None today.
 

New Puts

None today.
 

New Strangles

Diamonds - DIA - cls: 132.57 chg: -0.17 stop: n/a

Company Description:
The DIAMONDS Trust, Series 1 is an Exchange Traded Fund(ETF) that mimics the performance of the Dow Jones Industrial Average.

Why We Like It:
Bernanke's comments tomorrow morning could really spark a big move in the market. Unfortunately, we don't know what direction that move will be. We could speculate on a direction but instead we are suggesting a neutral strategy with this strangle. You will want to open positions before Bernanke begins speaking, which should give us about 30 minutes or more Friday morning. FYI: With any strangle play the biggest risk is that the equity just consolidates sideways and doesn't move enough to make one side of our play profitable.

Suggested Options:
A strangle involves buying both an out of the money call and an out of the money put. We're suggesting the September strikes below. At current values our estimated cost is $2.05. We want to sell if either option rises to $3.10 or more.

BUY CALL SEP 137 DAZ-IG open interest=17869 current ask $0.80
-and-
BUY PUT SEP 127 DAW-UW open interest= 8005 current ask $1.25

Picked on August 30 at $132.57
Change since picked: + 0.00
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 20.8 million

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S&P 100 Index - OEX - cls: 680.46 chg: -2.56 stop: n/a

Company Description:
The OEX is the S&P 100 index.

Why We Like It:
After all the recent volatility the OEX has come to rest right at the $680 level. This should allow traders a great opportunity to place some neutral option strategies. Our only concern is that with so much volatility in the market the normally expensive OEX options are even more pricey. OEX trading should be considered a more aggressive, higher-risk play. We're going with the $700 call and the $660 put but if you wanted you could use different strikes with the same strategy. Considering these prices we probably need to see a move into the $705-710 range or the $655-650 zone to be profitable. This will probably be a multi-day trade. Don't expect it all in one day. FYI: With any strangle play the biggest risk is that the equity just consolidates sideways and doesn't move enough to make one side of our play profitable.

Suggested Options:
A strangle involves buying both an out of the money call and an out of the money put. We're suggesting the September strikes below. At current values our estimated cost is $14.30. We want to sell if either option rises to $21.45 or more.

BUY CALL SEP 700 OEZ-IT open interest=8859 current ask $5.90
-and-
BUY PUT SEP 660 OEY-UL open interest=4148 current ask $8.40

Picked on August 30 at $680.46
Change since picked: + 0.00
Earnings Date 00/00/00
Average Daily Volume = 1306 thousand
 

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