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American International Group, Inc. Message Board

  • tlee22202 tlee22202 Nov 9, 2012 11:44 AM Flag

    My option play for AIG

    These drawdowns can get a bit depressing. Instead of just adding to my shares or ITM calls and subjecting myself to further big drawdowns, I have been adding some May 35/39 call spreads to my portfolio. This spread can be done for a debit of around 1.00. This should yield a 300% profit if pps is at 39. The May exp should also provide enough time, but not too much time. Since a pps of 40 could be another major resistance level, 39 should be a relatively easy target before May 2013.

    Any other good option trades?

    Sentiment: Buy

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    • Buy the May 32 calls for 3.25. Sell the Jan 35 calls for .67(diagonal calendar). Net debit 2.58. Roll up and out $1 in Feb, Mar, Apr and May. You'll end up $7 ITM and your net cost will actually be a credit.

      • 1 Reply to ninebagger9
      • Your diagonal call spread looks good. I may give it a try. I think the best way to play this is to just do a variety of different trades for different possible outcomes.

        What do you think of these protective put spreads I have recommended to my friends, which could be done almost as a free trade. I am thinking in case we get a market correction, it may drift down to 28, worst case scenario low of 25.

        long 1 Feb 30 / short 1 Feb 28 & short 1 Feb 27 for a debit of 0.05
        Potential Outcome at exp. :
        pps / profit
        29 / + 1.00
        28 / + 2.00
        27 / + 2.00
        26 / + 1.00
        25 / breakeven

        I also plan to do a second put spread:
        long 1 Feb 29 / short 1 Feb 27 & short 1 Feb 26 for a debit of 0.07

        The potential outcome of this second one would be the same but at one dollar lower strikes, breakeven at 24. (These trades are so cheap that I have rounded them to the nearest dollar).
        Now in case it gets really bad, these put spreads could always be rolled down to lower strike spreads.

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