JM86
New Contributor
Thinking about taking a shot in the dark with CIT.
I'm looking at selling the Jan '10 $1 put for $.35 and buying the Jan'10 $2.5 call for $.35
I know the company is in some trouble and they aren't completely out of the woods as far as bankruptcy is concerned (debt was just downgraded even more) but if things turn around I want a piece of it.
Decided on this strategy since worse case scenario the company goes bankrupt and I lose $100 per contract, if I buy 100 shares of stock my max loss is $140. Plus I won't have to spend any money up front besides commissions. The problem is I'm going to need a 79% run by January to be in-the-money.
As far as volatility goes, implied volatility for the put im short is 193.7 and the call is 160.6. So my position would be short volatility and it'll stay that way unless the stock moves closer to $2.50. Right now implied volatility is high for the stock historically but its very low relative to historical volatility over the last month.
There's a lot to think about so I'm still debating it, is anybody else playing this stock at all?
I'm looking at selling the Jan '10 $1 put for $.35 and buying the Jan'10 $2.5 call for $.35
I know the company is in some trouble and they aren't completely out of the woods as far as bankruptcy is concerned (debt was just downgraded even more) but if things turn around I want a piece of it.
Decided on this strategy since worse case scenario the company goes bankrupt and I lose $100 per contract, if I buy 100 shares of stock my max loss is $140. Plus I won't have to spend any money up front besides commissions. The problem is I'm going to need a 79% run by January to be in-the-money.
As far as volatility goes, implied volatility for the put im short is 193.7 and the call is 160.6. So my position would be short volatility and it'll stay that way unless the stock moves closer to $2.50. Right now implied volatility is high for the stock historically but its very low relative to historical volatility over the last month.
There's a lot to think about so I'm still debating it, is anybody else playing this stock at all?
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