3 Trades to pocket premium

aplus's picture

The market is bouncing back form the selloff over the past 2 weeks, and there continues to be positive news in the economy, housing, consumer sentiment, PMI data and foreign markets.  By all means we don't think US and global markets are out of the woods, but we've put in a little bottom in the short term.  To capitalize on the current situation in the markets, we are making 3 trades today:

1. Sell AAPL July 2013 $390 PUT for $3.15   (sold 1 put)

2. Sell BAC Aug 2013 $12 PUT for $0.15  (sold 25 puts)

3. Sell EBAY Oct $45 PUT for $0.88   (sold 4 puts)

We are making these trades because we still have a significant cash position in our accounts, and we'd be glad to purchase AAPL at $386.85, or just pocket the $315 per contract.  (We only sold 1 since we don't want to dish out a bunch of $39,000 puchases of round lots on Apple if we get put.)

Similarly, we would be glad to own BAC and EBAY at the discountedprices from where they are trading today.

There is a 23.3% chance based on volatility and probability anaysis that AAPL trades below $383.58 by 7/19/13.
There is a 19.6% chance that BAC trades below $11.64 by August expiration, and less than 25% chance that EBAY trades below $45 by October expiration.

If you have questions about these trades or the math behind the numbers, send me an email.

Happy trading.


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