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Tyco International Ltd. Message Board

  • acerbicabrasivejudgmental acerbicabrasivejudgmental Sep 26, 2013 10:08 PM Flag

    How to Make Double-Digit Gain by Trading TYCO Deriviatives

    Hey, youse smart techie analysts and traders, what am I missing or overlooking here?

    Assumption is that TYCO is stuck in a narrow trading range where the share price will neither soar nor collapse in the next couple of months (SIX weeks?).

    FACT: TYC is trading circa $35 per share, a reasonable price within a reasonable range.

    CALL Strategy: On the open tomorrow morning sell the 36-strike price option with a before Thanksgiving expiration date.
    Collect the CALL premium.
    The CALL option has an implied 20% volatility.
    The CALL option has about a 65% chance of expiring worthless.
    BEST CASE SCENAIRO: CALL option expires worthless and gambler keeps CALL premium.
    Worst Case Scenario:CALL seller has to cover the CALL.

    PUT Strategy: On the open tomorrow morning, sell the 34 PUT option naked with a just-past middle of November expiration date.
    Collect PUT premium.
    The PUT has an implied volatility of 22%.
    The PUT has about a 65% chance of expiring worthless.
    BEST CASE SCENARIO: PUT option expires worthless and speculator keeps PUT premium.
    Worst Case Scenario: The PUT is exercised and the investor owns more TYCO shares.

    TYCO Insider, how does that proposal look? Does the CALL look better than the PUT? Which to execute, or both? Not to be considered for the other two (2) Sisters---COV & TEL because they can take off! All IMHO.

    ACE: There are no jokers in my deck.

    Sentiment: Strong Buy

38.41-0.43(-1.11%)Jul 2 4:00 PMEDT