Good morning everyone! This is a new options trade in NYX, given to us by Daniel Jones, of OptionsNotions. The earlier trade (March) was concluded and new positions taken on June 4th. Due to yesterday’s massive sell off, NYX is cheaper now by about $2, and it’s probably an even better time to post this recommendation. – Ilene
Dear Option Investor,
NYX TRADE PROFIT TAKING RECOMMENDATION & OPENING NEW POSITIONS:
We mentioned earlier this week that we intended on making an "inter-week" pick or two, so here’s the first; We also swore not to go into the teeth of a market that seemed determined to sell off, but we see some opportunity in a specific name that really looks compelling to us. It’s a revisit to a name we found a great trade on back in the March – May timeframe, and its back at the starting blocks again, and we still like what we see there.
To recap the first trade, back on March 9, 2008, we made a trade recommendation (email us for a copy of the original if you would like it) on NYX stock at $60.51, which suggested buying the shares, a long call spread and also some written puts. By the early part of May, NYX had moved up over $76 this morning (May 7, 2008) and we made a call to exit the call spread, sell the stock and closing out the short puts. This recommendation performed quite well. Our specific original picks were: writing the buying the stock at $60 or less, (it touched off of $57.50 in the ensuing days) selling June 60 puts, selling the September 55 puts, and going long a June $70 / $80 call spread.
Taking those trades one by one, after the run up to May 7, we recommend selling covered calls against the long NYX stock holdings you may have had. We advocated selling the June $80 calls for $2.20, or even the September $85 calls for $3.50. Either series of calls represented fair value in our opinion. If you sold those calls, now is the time to buy them back cheap. June 80 calls can be bought back for under a nickel. September 85’s are roughly 40 cents. Recommendation: Close those short call positions…
To participate in what we would expect to be a a rebound in NYX stock price over the next few months, we recommend creating a call spread by going long the September $65 calls for $4.00, and sell the September $75 calls for $1.30, giving a net cost to the spread of $2.70. We would look to take profits on this position when the value to the spread is over $8.50, rather than try to capture the full $10 potential on the spread if NYX closed in September above the $75 mark.
Also remember that we’ve got our own forum / discussion site for OptionsNotions! Visit with us, and either talk about the picks with other subscribers, or access yours truly directly with any questions or comments. It has already proven itself valuable in last week’s discussion about UPS and its hook-up with DHL International. As always, the homepage link is www.optionsnotions.com