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Hello Ray,
Thanks for the post but I can not open attachment winmail.dat Can you
please re-post attached chart(s) as a .gif e.g.?
Best regards,
Alex mailto:alex_bell@xxxxxxx
Thursday, February 12, 2004, 2:41:14 AM, you wrote:
RR> Hi Rt's,
RR> I have recently been exploring calendar spreads using stocks other than the
RR> QQQ (and similar vehicles). In case someone does not know a calendar spread
RR> is buying a distant expiration call (or put) option, often a LEAP, and
RR> selling a closer expiration call (or put) at the same strike or higher for
RR> calls (lower for puts). The idea is that the LEAP acts as a low cost
RR> substitute for owning the underlying stock, while the short option generates
RR> cash.
RR> I started by looking for stocks with low cost Jan. '06 LEAPS and relative
RR> high calls expiring in Sept '04. One that immediately popped up is
RR> Bristol-Myers Squibb (BMY) currently trading at $30.05 per share. The BMY
RR> Jan '06 30 Call (WBMAF) is bid at $3.70 or $370.00 per contract. The BMY
RR> SEP 2004 32.5 Call (BMYIZ) ask is $1.05 or $105.00 per contract. This means
RR> that if one where to buy 1 WBMAF and sell 1 BMYIZ the net cost would be $370
RR> - 105 = $265.00 per contract.
RR> As you can see from the attached chart this produces a very favorable
RR> risk/reward profile. Trading 5 contracts of each call the maximum loss
RR> would be $1325.00 while the maximum profit would be $2195.00 and the
RR> position would be profitable any ware with BMY trading between $24.32 and
RR> $59.18.
RR> Comments anyone?
RR> Good luck and good trading,
RR> Ray Raffurty
RR> Yahoo! Groups Links
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