Tuesday, May 01, 2007

Straddle Time!

I mentioned before in my series on options trading how to make money if you are unsure which way the stock may go in the future. I also pointed out that options are a zero sum game, making them inherently riskier than stocks. With that being said, I feel that investors have a significant chance of making money by using a straddle on Affiliated Computer Services (ACS) going into earnings.

Let's review the key elements of an attractive straddle. One of the most important aspects of a good straddle is the current price of the stock. The closer the price is to strike price of the call and put you are going to purchase, the better the straddle play is. The second most important part of the straddle is the costs to straddle. The cost is cheap if the break-even future prices are significantly less than your predicted future movement. The third most important part of a straddle is the time value of your option position; the longer you have to sell your call and put the less risk you are taking on.

Given these elements here's how ACS stacks up:
- The current price of the stock is only 9 cents away from the $60 strike price.
- I managed to pay $1 for both the call and put, meaning the stock would only need a 3.69% increase or a 3.46% decrease to be in the money given my broker’s options trading fees. As you can see from the Bloomberg image below, this straddle would have been in-the-money five out of the last six sessions after the earnings report.
- If you do take this position, you have the luxury of waiting until the 19th of May to liquidate your positions; a long time given this volatile market.

So why is this so cheap? There have been significant buyout talks driving the price of these options. I feel that this is insignificant because these talks have lasted for several months and it appears that shareholders are ultimately unsatisfied with these offers. In fact, I feel that this release will have a great impact on the bid price of this buyout firm, ultimately allowing for significant share price volatility.

10 comments:

Anonymous said...

Ha! thats what you get for buying options. you better take your loss and get out, it's clearly gonna pin.

rmacguidwin said...

You're definitely right. The last couple trades have shown that I will probably lose around 30-40 dollars. I have set my limits slightly below what I purchased the options at, but there is still speculative value due to the buy-out negotiations.

Thanks for your comment.

Anonymous said...

[u][b]Xrumer[/b][/u]

[b]Xrumer SEO Professionals

As Xrumer experts, we from been using [url=http://www.xrumer-seo.com]Xrumer[/url] fitted a large time for the time being and know how to harness the colossal power of Xrumer and turn it into a Cash machine.

We also purvey the cheapest prices on the market. Many competitors will expect 2x or square 3x and a end of the opportunity 5x what we pervade you. But we believe in providing prominent accommodation at a small affordable rate. The unbroken something of purchasing Xrumer blasts is because it is a cheaper alternative to buying Xrumer. So we train to abide by that bit in cognizant and provide you with the cheapest censure possible.

Not just do we cause the best prices but our turnaround time for your Xrumer posting is super fast. We will pull someone's leg your posting done before you discern it.

We also cater you with a full log of affluent posts on contrary forums. So that you can see over the extent of yourself the power of Xrumer and how we get harnessed it to help your site.[/b]


[b]Search Engine Optimization

Using Xrumer you can think to apprehend thousands upon thousands of backlinks for your site. Many of the forums that your Site you force be posted on have high PageRank. Having your association on these sites can truly help establish up some top-grade dignity recoil from links and genuinely boost your Alexa Rating and Google PageRank rating utterly the roof.

This is making your instal more and more popular. And with this better in reputation as well as PageRank you can envisage to witness your milieu definitely superiority high-pitched in those Search Mechanism Results.
Conveyance

The amount of conveyance that can be obtained aside harnessing the power of Xrumer is enormous. You are publishing your plat to tens of thousands of forums. With our higher packages you may still be publishing your locale to HUNDREDS of THOUSANDS of forums. Create 1 collection on a stylish forum drive almost always enter 1000 or so views, with signify 100 of those people visiting your site. Now imagine tens of thousands of posts on fashionable forums all getting 1000 views each. Your freight longing associate at the end of one's tether with the roof.

These are all targeted visitors that are interested or singular nearly your site. Assume how innumerable sales or leads you can achieve with this colossal gang of targeted visitors. You are line for line stumbling upon a goldmine ready to be picked and profited from.

Keep in mind, Traffic is Money.
[/b]

TRAVERSE B RECOVER YOUR CHEAP ERUPTION TODAY:


http://www.xrumer-seo.com

Anonymous said...

Infatuation casinos? vouch barter in return this unformed [url=http://www.realcazinoz.com]casino[/url] chairwoman and humbug online casino games like slots, blackjack, roulette, baccarat and more at www.realcazinoz.com .
you can also scrutinize our blooming [url=http://freecasinogames2010.webs.com]casino[/url] alongside at http://freecasinogames2010.webs.com and overwhelm straightforward folding coins !
another unfrequented [url=http://www.ttittancasino.com]casino spiele[/url] stage is www.ttittancasino.com , benefit of german gamblers, branchlet in unrestrained online casino bonus.

Anonymous said...

Someone deleted several links from storewith and shared ...

From now, we will use www.tinyurlalternative.com as our default [url=http://www.tinyurlalternative.com]url shortener[/url], so every url will be there and visible for everyone.

You can pick out from several great [url=http://kfc.ms]short url[/url] address like:

kfc.ms easysharelink.info jumpme.info megauploadlink.info megavideolink.info mygamelink.info myrapidsharelink.info mytorrentlink.info myurlshortener.com mywarezlink.info urlredirect.info urlshrinker.info weblinkshortener.com youtubelink.info and many others.

They include above 60 other available domains and the [url=http://myurlshortener.com]url shortener[/url] service work properly for free without any registration needed.

So we think it is good notion and suggest you to use [url=http://urlredirect.info]url redirect[/url] service too!

Thank you.

Anonymous said...

Just want to say what a great blog you got here!
I've been around for quite a lot of time, but finally decided to show my appreciation of your work!

Thumbs up, and keep it going!

Cheers
Christian, iwspo.net

Anonymous said...

A shared snare hosting advantage or effective hosting utilization or derive assemblage refers to a cobweb hosting checking where many websites reside on anyone web server connected to the Internet. Each placement "sits" on its own break-up, or section/place on the server, to support it sort from other sites. This is customarily the most close-fisted choice for hosting, as many people allocation the overall expenditure of server maintenance.
[url=http://hostinghouse.pl]hosting[/url]

Anonymous said...

[b][url=http://www.uggsbootsoutletmarket.com/]uggs outlet[/url][/b] Once more handbags from manufacturer like Louis Vuitton Greta, Prada purchasing Tote, Chanel Metallic bag and Chanel zippered bag are essentially the most recommended alternative amongst celebration goers. Without doubt these brand names is going to be high-priced not producing it achievable for anyone to private one. For being capable to posses one you can should hold out till the shops place up product sales that may get annoying.

[b][url=http://www.uggsbootsoutletmall.co.uk/]ugg boots[/url][/b] "They'll check out jail to get a couple of several years, but jail to them will be the equivalent of a college. This can be wherever they study," Improve mentioned. "An old-timer with the sport can take them aside and reveals them the best way to do points. Will you be at present inclined to comprehend and that is the best LV Bags to search out coarse wild hair? Write-up, we are going to comment on exactly what are most superb flat irons which may exhibit vast curly hair a splendidly especially mixed with clean in general glimpse. You'll learn one thing regarding the place for womens awesome hair which could just echo the sensation. Luxurious pass up appropriate coupled with effortless mane who come alive coupled with healthiness.

[b][url=http://www.louisvuittonpursesmarket.com/]louis vuitton outlet[/url][/b] Families from the 21st Century come in all styles and sizes. Divorce, remarriage, parenting out-of-wedlock along with a host of other variables have turned nuclear people to the exception alternatively compared to norm. As very little for a half-century in the past, kids have been ordinarily raised in residences with two organic mother and father, and likelihood are, individuals two mother and father had the assistance of extended relations close by.

[b][url=http://www.uggsbootsoutletmall.co.uk/]www.uggsbootsoutletmall.co.uk[/url][/b] These slight suppliers assure it truly is promising for someone to have their dwelling a humble considerably more straight forward. Trip in, acquire what we'd like, make our commit in, and obtain again to what we experienced been accomplishing. Store help out to generate a tricky residing a petite much significantly less eventful.

[b][url=http://www.bestlouisvuittonbags.co.uk/]louis vuitton bags[/url][/b] Everything you really consider, or don't think you might sub-conconciously act out. Conduct follows belief. A true skilled will never let modern prospects get "shaded" by failures of yesterday.. This is actually the motive why progressively more youngsters are planning to enter on this discipline. CNA training courses can be carried out on the web and also by attending physical lessons. These programs offer you limitless pros.

Anonymous said...

top [url=http://www.001casino.com/]001[/url] brake the latest [url=http://www.casinolasvegass.com/]casino[/url] unshackled no set aside reward at the foremost [url=http://www.baywatchcasino.com/]casino gratuity
[/url].

Anonymous said...

ConsiFer the print heaF resource, cartriFge resource anF amount oF carFs [url=http://www.germanylovelv.com/]Louis Vuitton Outlet[/url]
be printeF when choosing a printer. Make sure when buying an expensive printer that you have a gooF reason [url=http://www.germanylovelv.com/]louis vuitton knolckoffs[/url]
buy it. IF you neeF lots anF lots oF business carFs, then consiFer buying a extra expensive printer.
You must strive [url=http://www.germanylovelv.com/]Louis Vuitton Outlet/[/url]
stanF out From the rest when you Fevelop your logo Fesign. The aim really shoulF be [url=http://www.germanylovelv.com/]Louis Vuitton Outlet[/url]
look more proFessional anF reliable then any oF your competitor[url=http://www.germanylovelv.com/]louis vuitton knolckoffs[/url]
Make sure that the layout or the phrase in your logo Fesign is catchy anF can easily grab the attention oF your target market..
Most oF the important cities are in a position [url=http://www.germanylovelv.com/]Louis Vuitton Outlet/[/url]
oFFer various inFicates oF link like AFSL, bluetooth, wireless anF Folks are getting connecteF on their pcs, laptop computers anF cellphone[url=http://www.germanylovelv.com/]Louis Vuitton Outlet/[/url]
The rural locations are battling [url=http://www.germanylovelv.com/]louis vuitton knolckoffs[/url]
get relateF as well as the only possibility obtainable [url=http://www.germanylovelv.com/]Louis Vuitton Outlet[/url]
them at this time woulF be the olF antiquateF Fial up system working with a phone line, or via satellite. Claims are actually maFe by authorities, that in a several years, everyboFy is going to be capable [url=http://www.germanylovelv.com/]Louis Vuitton Outlet[/url]
get a phone anF so, may have online accessibility oFFereF [url=http://www.germanylovelv.com/]louis vuitton knolckoffs[/url]
them.