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Unformatted text preview: 1. Selling an Out of the Money Call Example: XYZ stock is trading at $86 Outlook: You are neutral to bearish on XYZ stock. Possible strategy: Sell Out of the Money Call Sell one XYZ November 90 strike call at $2.40 Fill in the missing values in the table. Stock Price at Expiration Net Profit 75 240 80 240 85 240 92.40 95-260 100-760 2. Stock Repair Strategy Example: You bought 100 shares of XYZ stock at $70 and it is now trading at $60 Outlook: You are looking to recover your original investment with little or no additional risk. Possible strategy: Ratio Call Spread Buy one Dec 60 strike call at $3.50 Sell two Dec 65 strike calls at $1.75 Fill in the missing values in the table. XYZ at Expiration Change in the Value of the Stock Value of $60 Call Value of $65 Calls Net Profit 55-1500-1500 60-1000-1000 65-500 500 70 1000 1000 75 500 1500 2000 3. Short Strangle on Google Example: Google is trading at $575 Outlook: You anticipate a significant move either up or down with a pending earnings...
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- Spring '09