Colgate-Palmolive Company (CL) Iron Condor

Colgate-Palmolive (CL) is certainly a consumer staple stock if there ever was one, producing toothpaste, shampoo, cleaning supplies, and other household necessities.

More News On CL

• CL

• NYSE stocks posting largest volume increases
  July 29, 2010
• Business Highlights
  July 29, 2010
• Closing Update: Stocks End Just in Red
  July 29, 2010

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CL is also not typically a huge mover and can be a defensive stock when the market is up against a wall. This option-trading idea is more of a statistical-type trade as CL has not been above 90 in over three years and has not been below 70 since May of this year. The bias in the market is obviously bullish, but being that CL can be a bit defensive, a market pullback may not hurt CL as much.

Iron Condor Trade Details:

CL is currently trading at $83.04.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. Please note that a brokerage platform that provides for four-legged spread trading (such as OptionsHouse ) will allow the simultaneous execution of all four legs, typically paying one spread trading commission to do so. Additionally, if you so choose, you should then be able to set a limit order for the spread as a whole, thereby securing a better credit.

Iron Condor Part I: Bull Put Spread –

• Sell the February 75 put for $0.95 per contract
• Buy the February 70 put for $0.35 per contract
• Net credit of $0.60 per spread

Iron Condor Part II: Bear Call Spread –

• Sell the February 90 call for $0.75 per contract
• Buy the February 95 call for $0.25 per contract
• Net credit of $0.50 per spread

Overall credit for the spread: $1.10 (or $110)

Profit/Loss Details:

Maximum profit: $1.10 (the total premium collected) minus commissions.

Maximum risk: $3.90 (the difference between put or call strikes minus the premium collected). Return on risk is approximately 28% for this strategy.

Upper breakeven price: $91.10 (the strike of the sold call plus the total premium).

Lower breakeven price: $73.90 (the strike of the sold put minus the total premium).

Remember, trading Ideas are generated by the ONN Idea Generating Platform as a starting point for people to begin their own research. Trading ideas are not intended as trading or investment advice or recommendations that any particular security or strategy may be suitable for any specific person. You are solely responsible for your investment decisions, but we hope that some of these ideas will give you a starting point as you look for strategies to employ.

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