Hello Options Actionfaithful. We promised a recap of the trades - so here it is.
Dan Nathan kicked it off with a 1X2 put spread on Bank of America , where he bought the November 15-strike put for $1.10, and sold 2 of the November 12-strike for $0.40 cents each, collecting a total of $0.80. Net net, Dan paid a total of $0.30 cents for a trade that is most valuable if Bank of America stock trades below $15 and $12 bucks, with the sweet spot being that $12 dollar level. Anything below $12, and Dan could have the stock "put" to him.
On the retail front, Scott Nationstook a dim view on Wal-Mart earnings and recommended buying a put spread.
Specifically Scott bought December 47.5-strike put for $2.20. But being the frugal guy that he is, he sold the December 42.5-strike put against it. Why'd he do that? Because Scott didn't think Wal-Mart would trade much below $42 bucks, so by selling that put, Scott limits his upside, but he reduces his cost by a third, and as long as Wal-Mart stays above the $42, he's not giving anything up.
And in the award-winning put up or shut up, which has become required viewing for some options traders, Dan and Mike duked it out over Priceline .
They both incorrectly had bearish bets, with Dan buying the August 130/120 put spread, where he paid $5.50 for the August 130-strike and then sold the August 120-strike put for $2.25, paying a total $3.25 with the potential to make $6.75. Dan's trade is most profitable if Priceline goes to $120. Mike made a similar, albeit more complex trade. He bought the 130/120/110 put fly. Say what? Mike essentially bought the same put spread that Dan bought, but then he sold the August 120/110 put spread, selling the August 120-strike put for $2.25 and then buying the $110 put for $0.80. Like Dan, Mike's sweet spot is that $120 level. That's because the $130/120 put spread that he bought is most valuable if Priceline stock goes to $120, and the put spread 120/110 put spread that he sold is most valuable if Priceline stays about $120. All told Mike spent $1.80 with the possibility of making $8.20. With Priceline stock surging some $20 buck since the time of the trade, both were very wrong. But imagine if they had shorted the stock. They'd be out $2000 bucks. As it stands, had you put both trades on, you'd be out about $400 bucks. Not great, but certainly better than a sharp stick in the eye.
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