Sell Covered Calls
on YHOO at $16.
Dec 16th expiration
Options are 62 cents.
Return potential = 4% in 9 days
Risk is a loss starting at $15.38.
With takeover bids surrounding
YHOO, there is risk that no deal
gets done by year end and a drop
down to the $14 area where the
stock was prior to renewed t/o talk.
YHOO is a reasonable value in the
sector so buying the stock is comfortable
for me with or without a deal. For now,
it makes sense to make some extra
income from the speculators who are
paying relatively high prices for YHOO
call options in the hopes of a higher deal.
By: Technical Tim, 10:16AM EST, Mon Dec 5, 2011
As a reminder: Long YHOO at a net cost of $15.38, short the Jan $16 calls for $0.51. 2nd Position: Long YHOO at $14.96 and short the Jan 15 calls for $0.83. Breakeven on the whole trade is $14.55 (approx). The annualized return if YHOO stays above $15 by Jan expiration is a big number. Does anyone want me to post a spreadsheet of these trades?