Taking advantage of what appear to be exuberant options prices I did a buy write @ $95.50 and April 95 sold for $18.50
About 19% in 5.5 months if all works out well.
JT
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$100 Nov 20 calls bid ask is $4.90-$5.50, so let’s say $5. For simple math, let’s say that is 5% return in 15 days. That is a huge annual return.
Or this math, you buy stock T $97.38 - $5 = $92.38 and get called away at $100 in 15 days. That is about $8 in 15 days. Even better math.
Implied volatility about 85%!
The bid on the $105 Nov call is $3.10-$3.90 and you won’t get called until $105.
So will something terrible happen in the next 15 days? If it does you keep your premium and your stock and can do it again later. IF something good happens you get called away. If nothing happens to the stock price you keep your premium and do it again. The chance of it shooting to $120 seems slim, so you likely won’t have regrets that you missed out on a big move.
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Agree with Puddinhead. The buy/write and short put strategies are far better in short timeframes than long timeframes.
People pitch these as beginner option strategies and less risky, but when done over a long period of time there is substantial risk of the stock going down but you only having limited upside. They are a lot riskier than many other option strategies out there.
Even worse, when done over long periods of time with quality stocks, they can cause you to miss out on a lot of gains in spite of giving a nice annual return.
The Nov situation for BOFI is one of the few circumstances where I think it makes sense, but keep in mind that high volatility is usually high for a reason. But the other side of that is that high volatility options will decay increasingly fast as they get close to expiration
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People pitch these as beginner option strategies and less risky, but when done over a long period of time there is substantial risk of the stock going down but you only having limited upside. They are a lot riskier than many other option strategies out there.
The Apr16 options might be an alternative. You could buy BOFI shares and sell covered calls and naked puts for a combined premium of close to $39. Very juicy if you believe the company is not a fraud.
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I’d rather just short the April puts and buy the calls for almost flat cash outlay so you don’t tie up as much capital. That way it’s a synthetic stock position where the upside isn’t capped.
Easy to hedge the downside by buying some lower strike or shorted date puts on a monthly basis too. May consider that actually because I do think it’s a quality company and wouldn’t mind adding back some exposure to it, but not willing to buy shares again yet until the uncertainty is gone