In the file of better late than never, thought I'd post Friday's picks from Options Action.
As a bearish bet on the financials, (or a wager on the collective insanity of the ratings agencies), Dan Nathan of Riskreversal.combought the January 35/30 put spread on Deutsche Bank for $1.10, a trade that could be worth as much as $3.90 if DB trades below $30 by January expiration.
Trade and breakdown are below.
DAN'S DEUTSCHE BANK OPTIONS TRADE - STOCK AT $40
HOW DAN'S DEUTSCHE BANK TRADE MAKES MONEY
The other trade required much less premium but carried much greater risk. It came courtesy of Oppenheimer's Carter Worth and Cantor's Mike Khouw. As a bullish play on retailer Target , they bought the January 46/57.5 risk reversal for even money. Specifically, the trade involved selling the January 46-strike put for $0.25 and using that money to buy the January 57.5-strike call for $0.25. The trade costs nothing, but there is a significant tradeoff; by selling that put, Mike could be forced to buy target stock at that put's strike price - or for $46, even if it falls well below that level by expiration.
So far so good, and the trade and breakdown are below.
MIKE'S TARGET OPTIONS TRADE - Stock AT $53
HOW MIKE’S TARGET TRADE MAKES MONEY
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