“Something wonderful.”
“I’m afraid”
“Don’t worry we’ll be together.”
“Where?”
“Where I am now.
And so goes the conversation between the HAL 9000 and Dave Bowman in 2001: A Space Odyssey from 1968. Have I been absent so long that I have gone wacko? Sorry, but I’ve been able to completely rationalize that… I am sane!
But, maybe something wonderful IS going to happen to Yahoo! (YHOO). Seems that all the big boys have suddenly shown interest in this remnant from the early days of the internet – like Mr. Softie and Google (maybe a better name is gobble – as in gobble up the whole world).
My attention was drawn to a different sort of spread play on YHOO by a weekend email from iVolatility.com. They suggested a 17.5/19 Call Debit Spread coupled with a Naked Put at 15 as a takeover play. I liked the idea but didn’t like the cap on the upside with the Debit Spread.
Then I took a peek at CallWriter to see if they had anything. I found 4 possibilities in the SuperPut tables but didn’t want to tie up the capital by buying the stock.
So I made up my own play using a long APR 17 Call and selling 2 NOV 15 Puts naked. You guessed it, I’m hoping something really wonderful will happen. If it doesn’t, then that’s OK too. The Naked Puts pay for almost ½ of the Long Call. If the price remains the same or support at 15 holds (see the price chart below), then I can continue to write more Naked Puts (collect more credit) up to April expiration. If I get Put the stock at 15, I will write Covered Calls against it. If the buyer offers $20/share, then I stand to make a nice big hunk of change from this – around $300.
YHOO Risk Profie for my spread (click to enlarge)
YHOO Price Chart as of the morning of 10/24/11 (click to enlarge)
Conservative Account Update
I haven’t been trading in my Spread Account lately, but I have been doing a few things in the Conservative/Profit Tent Portfolio™ Account.
Coke (KO) is the current money pot. I rolled the Naked Put at 67.50 for the third time last Friday. I have now collected at total of $385 in Naked Put credits so far. I opened a Naked Put on FCX for November and the OCT Naked Put on Intel (INTC) expired OTM last week.
Happy Trading
◄Jeff ►
