With the next options expiration being August 22, 2009, I decided to blog about this option strategy. I use the straddle often, but don't blog about it too much. The option straddle requires a solid background in options, as you'll need to know how to purchase both call and put options.
To learn more about opening this type of option position and other option strategies click here.
As we all know the stock market can change greatly over a months time, and using this strategy allows us to capture both the upside as well as the downside. In either case a continuous trend is needed. For this analysis I chose 20 higher Beta stocks, with market caps greater than $1 Billion.
Understanding the Table
The table below has each of the following components:
- Companies listed
- Their ticker
- The last price as of Friday July 17, 2009
- The Call and Put option strike price
- The % move up required to break even from the position
- The % move down in order to break even from the position
Buy the AK Steel (AKS) August 20 Call option, and August 20 Put option. The required move up from the closing price is 18.81%, and the required move down from the closing price is 18.71% in order to break even from opening this option straddle position.
|Company||Ticker||Price||Call/Put Strike||Move up||Move Down|
|AK Steel Holding Corporation||AKS||19.99||20||18.81||-18.71|
|American Express Company||AXP||28.03||28||12.38||-12.59|
|Barclays PLC (ADR)||BCS||20.5||20||13.41||-18.29|
|Genworth Financial, Inc.||GNW||6.24||6||50.64||-58.33|
|ICICI Bank Limited (ADR)||IBN||30.46||30||14.58||-17.60|
|ING Groep N.V. (ADR)||ING||11.04||10||9.60||-28.44|
|Intuitive Surgical, Inc.||ISRG||155.54||155||0.59||-1.28|
|Joy Global Inc.||JOYG||35.92||36||13.03||-12.58|
|Las Vegas Sands Corp.||LVS||8.59||9||20.49||-10.94|
|Prudential Financial, Inc.||PRU||39.03||39||7.48||-7.64|
|Teck Resources Limited (USA)||TCK||21.06||20||7.79||-17.85|
|The Cheesecake Factory Incorporated||CAKE||17.54||17.5||22.01||-22.46|
|The Dow Chemical Company||DOW||16.99||17||25.66||-25.54|
|United States Steel Corporation||X||37.42||37||13.58||-15.82|
These option ideas are all extremely dependent on volatility and direction. Remember the risks involved when purchasing both call and put options. To learn more about options click here.
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