As the market sighs and concedes a monster gap up, isn’t it good to know that there’s always a bull market somewhere? We’re speaking, of course, about the Intrade contract betting that Sarah Palin will withdraw (or, more likely, be withdrawn) as the Republican VP nominee before the 2008 election.
If you were actually long this PALIN.VP.WITHDRAWN contract, perhaps you could hedge the gamble with some long 2008.PRES.McCAIN, on the view that these might be close to inversely correlated: if Palin is withdrawn,…
Back on June 4, we suggested some relatively conservative ways to play the potential downside in Lehman Brothers (LEH). Since we published that piece, the stock has dropped more than 13% to 27.20, and with earnings now behind us it’s time to revisit these positions.
LEH July 40/42 call vertical – we initially sold this vertical for a credit of $0.34. You could buy it back right now for about $0.05, locking in a gain of 17.46% return on capital risked. Since…
Back on April 9, we published a bonus trade for our members that allowed them to participate in the rally that ensued, but with absolute downside protection. We brought in a $0.20 credit upon opening the position, and you could sell it to close today for about $0.32, which means this trade returned $0.52, for a 28% return on capital risked. Not too shabby.
The broken call condor was constructed like this:
+1 SPY May 141 call
-1 SPY May 142 call
-1 SPY May 144…
These are very short term overbought/oversold technical plays only.
Energy (XLE)
Thesis: The Energy ETF is well overbought on a short-term basis – practically maxed out at 99.98, and the implied volatility relative to its historical volatility over the past 21 sessions is also giving a sell signal.
Trade: Buy buy buy lots of naked puts! Just kidding. The XLE April 80/82 call vertical is selling for about $0.60. There are only 8 days left until April expiration if things don’t turn out…
Does this describe you?
You’d like to participate in any nice rally that comes our way over the next month;
You’d like to avoid any and all downside risk in case the rally never comes and indexes stay flat or plunge;
You’d like to get paid just for hanging around and waiting to see what happens.
Here’s a funky little way to do exactly those things. This trade has all the features that long-theta traders love, including long theta (positive time decay), defined risk,…
Tuesday, September 2, 2008
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