Opening: SAVE January 19th 10 Covered Call
... for an 8.15 debit.
Comments: The IV in here is redonk (IVR 96/IV 238.6%), no doubt because the merger decision between SAVE and JBLU is in a court room, with the trial scheduled to finish up at year end and a ruling to follow thereafter. At the moment, the buyout proposal is for $33.50/share and/or a $29.80 "Deal-Through Price." While most are probably trying to arbitrage SAVE for the difference between current price and the potential buy-out amount, I'm looking to make money even if the buyout doesn't go through with a cost basis below SAVE's 52-week low and/or the judge takes a bit of time to mull over whether to impose conditions on the buy out (at which point I hope to be out of the trade).
Naturally, if the deal does go through, and price jumps to the buyout price, I'll be pissed that I didn't go just Plain Jane long call ... .
Metrics:
Max Profit: 1.85 ($185)/contract
Buying Power Effect: 8.15 ($815)/contract
ROC as a function of BPE at Max: 22.7%
ROC at 50% max: 11.3%
Comments: The IV in here is redonk (IVR 96/IV 238.6%), no doubt because the merger decision between SAVE and JBLU is in a court room, with the trial scheduled to finish up at year end and a ruling to follow thereafter. At the moment, the buyout proposal is for $33.50/share and/or a $29.80 "Deal-Through Price." While most are probably trying to arbitrage SAVE for the difference between current price and the potential buy-out amount, I'm looking to make money even if the buyout doesn't go through with a cost basis below SAVE's 52-week low and/or the judge takes a bit of time to mull over whether to impose conditions on the buy out (at which point I hope to be out of the trade).
Naturally, if the deal does go through, and price jumps to the buyout price, I'll be pissed that I didn't go just Plain Jane long call ... .
Metrics:
Max Profit: 1.85 ($185)/contract
Buying Power Effect: 8.15 ($815)/contract
ROC as a function of BPE at Max: 22.7%
ROC at 50% max: 11.3%
Trade fechado manualmente:
Global Close: Closed for an 8.46 credit. .31 ($31) winner.