Monday, December 13, 2010

Trade - NYX covered calls

NYX hit $30 today. In addition, today was the div x-date so the position accrued .30 or 1% div today. These two triggers caused me to review the position

Fundamental story remains the same. The stock has moves straight up from $28.

Sold $30 Dec $18 calls (5 days until expiration)for $.35 with a implied vol of 25+.
Several scenario's.

Stock pins at $30 for the week. My most probably scenario. The "even number" nature of the price, the open option interest at $30, and a potential retracement towards 200dma ($25.4) could have the stock stick at around the $30 level this week. If the price falls, time decays and vol drops I would look for a chance to cover this position for a gain of .5% or more.

Stock continues to climb this week. - In this case the position will be called away at $30. That means cap gains from $29 to $30 3+%,1% div, 1% option profit. A 5% gain on this trade.

Stock plummets - the option will have provided a little downside protect and the core trade remains in place (for better or worse).

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