Options Action Recap
It is the second most frequently asked question from Options Action fans: Where can I get a recap of the strategies on the show? (For the record, "Does Melissa Lee really read all the emails?" is the most popular question, and I am happy to say the answer is yes).
Well, you asked, and now we'll deliver. Here's your recap of Friday's trades.
The first up was Riskreversal.com's Dan Nathan, who decided to get short the market through put spreads on the Diamonds . The thinking was simple; it's only a matter of time before the financial turmoil in Europe impacts our multinationals, which generate so much of their revenue abroad. His trade and payouts are below.
Dan's Put Spread on the Diamonds:
- BUY OCT 105-STRIKE PUT FOR $3.50
- SELL OCT 95-STRIKE PUT FOR $1.50
How Dan's Diamond Trade Makes Money:
- LOSSES ABOVE $103
- PROFITS BELOW $103
- PROFITS CAPPED AT $95
The second trade was actually a bullish one on Oracle heading into earnings. In the file of "Better to be lucky than good," Goldman Sachs actually added Oracle on its conviction buy list this morning. Perhaps they're watching, or perhaps valuations and a good looking chart compelled the good folks over at Goldman to initiate their upgrade. Either way, Cantor's Mike Khouw expressed his bullish view by using what's called a "call spread, risk reversal." Basically, he sold a put and used that money to buy a call spread for essentially no cost. The tradeoff? He may have to buy Oracle stock at that put's strike price, or for $22 on October expiration. His trade and payouts are below.
Mike's Call Spread, Risk Reversal on Oracle:
- SELL DEC 22-STRIKE PUTS FOR $1.05
- BUY DEC 27-STRIKE CALL FOR $1.85
- SELL DEC 30-STRIKE CALL FOR $0.80
How Mike's Oracle Trade Makes Money:
- PROFITS CAPPED AT $30
- PROFITS ABOVE $27
- GET LONG AT $22
- LOSSES BELOW $22
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