ONN.tv» Trading Ideas, Options Trading Strategies

Apple Inc. (NYSE: AAPL) bull put spread

the ONN Idea Generating Platform — Mon, 15 Mar 2010 18:30:00 +0000

Apple Inc. (NASDAQ: AAPL) has been rallying into the release of the iPad, due out in early April. AAPL has had a history of doing this in the past, where it advances into the release of a product, then sells off.

Traders might want to use today’s pullback as a chance to jump into this run. Just be sure to exit before the release of the iPad on April 3.

AAPL Credit Spread Trade Details:

AAPL is currently trading at $222.05, down roughly 2% so far on the day.

Credit Spread/Bull Put Spread–

Sell the April 220 put
Buy the April 210 put
Net credit of $3.10 per spread or better

By opening a free virtual trading account , you can visualize the risk/reward dynamics of this bull put spread.

Profit/Loss Details:

Maximum profit: $3.10 (the credit collected).

Maximum risk: $6.90 (the difference between strikes minus the credit collected). Return on risk is about 45% in 32 days.

Breakeven: $216.90 (the strike of the short put minus the 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.

For more on AAPL:

Technology Shares Under Pressure as Google Faces Off With China

Apple (AAPL) spikes on iPad announcement

What’s Hot! (AAPL) hits the Hotlist on iPad release announcement

MasterCard (NYSE: MA) Bull Put Spread

the ONN Idea Generating Platform — Mon, 15 Mar 2010 17:00:02 +0000

MasterCard Inc. (NYSE: MA) is having a nice pullback today after its recent run. This morning, MA announced a new BlackBerry application to help consumers find their way to an ATM. Maybe this will help investors find their way back to MA. For investors who feel MA may have continued upside (or at least limited down), the Idea Generating Platform (IGP) found a bull put spread in April that is below the 50-day simple moving average.

MA Credit Spread Trade Details:

MA is currently trading at $246.46, down roughly $3.50 so far on the day.

Credit Spread/Bull Put Spread–

Sell the April 240 put
Buy the April 230 put
Net credit of $2.40 per contract or better

By opening a free virtual trading account , you can visualize the risk/reward dynamics of this bull put spread.

Profit/Loss Details:

Maximum profit: $2.40 (the credit collected).

Maximum risk: $7.60 (the difference between strikes minus the credit collected). Return on risk is about 31% in 32 days.

Breakeven: $237.60 (the strike of the short put minus the premium).

Freeport-McMoRan (NYSE: FCX) bull call spread

the ONN Idea Generating Platform — Mon, 15 Mar 2010 15:29:08 +0000

Kevin Cook wrote a great article on copper last week, citing real industrial demand as a support catalyst for copper prices. If that is the case, Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) should see moderate support in its stock price, which has been sideways for the past nine days. If you agree with this thesis, ONN.tv’s Idea Generating Platform (IGP) found an in-the-money (ITM) bull call spread in April.

FCX Debit Spread Trade Detail

FCX is currently trading at $79.13, down 1.7% this morning.

Debit Spread/Bull Call Spread -

Buy the April 70 call (ITM)
Sell the April 75 call (ITM)
Net debit of $4.10 or less

Profit/Loss Details:

A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for this trade.

Maximum risk: $4.10 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $0.90 (the difference between strike prices -5 – minus the debit). Return on risk is 22% in 35 days.

Breakeven: $74.10 (the strike price of the purchased call plus the debit paid).

For more on FCX:

Copper as PhD, Iron as Undergrad

Bullish outlook in Freeport-McMoRan

American International Group (NYSE: AIG) bear call spread

the ONN Idea Generating Platform — Mon, 15 Mar 2010 14:34:48 +0000

American International Group (NYSE: AIG) continues to rally today, but some traders may think the run is going to stop – at least for the short term. The options markets may actually work to your advantage if you are a bear call spread seller because of the positive skew to the upside calls. In other words, while implied volatility typically decreases as you move higher up the call strikes, AIG calls have seen implied volatility increase, offering more premium when selling out-of-the-money calls.

AIG Credit Spread Trade Details:

AIG is currently trading at $34.98, down about 2.13% today.

Credit Spread/Bear Call Spread –

Sell the April 41 call
Buy the April 50 call
Net credit of $0.98 or better per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $0.98 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $8.02 (the difference between strikes minus the credit collected). Reward on risk is approximately 12% in 35 days.

Breakeven: $41.98 (the strike of the lower call plus the premium collected).

For more on AIG:

Is AIG Still A Buy?

Bull call spread in American International Group (NYSE: AIG)

AIG options volume active for second consecutive session

Dell Inc. (NASDAQ: DELL) covered call

the ONN Idea Generating Platform — Fri, 12 Mar 2010 19:25:48 +0000

Last week, we recommended a long call in Dell Inc. (NASDAQ: DELL) where we bought the April 14 call for 32 cents. That call is now trading for 65 cents since the underlying stock has rallied 6% to $14.25 from $13.45. While the odds of another 6% rally – and another double on a call play – in fewer than 10 days is unlikely, we still like this name. Today we’re considering a buy-write. Buying the stock at $14.25 and selling a May 15-strike covered call for at least 50 cents will give us a nice “cushion” and an effective cost on the shares of about $13.75. Plus, we get all the appreciation from here to $15 if the stock should rally above our short strike and our shares get called away.

DELL Covered Call Trade Details:

DELL is currently trading at $14.25, down roughly 0.3% today.

Covered Call –

Sell the March 15 call (out-of-the-money) for $0.50 per contract (or better).
Buy 100 shares of stock for every sold call (current price for 100 shares is $1,425).

A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for this covered call trade.

Profit/Loss Details:

Maximum potential profit:, if assigned, is $1.25. Return on risk is approximately 9%.

Maximum risk: $13.75 (the stock price at the time of purchase minus the credit).

Breakeven: $13.75 (the stock price at the time of purchase minus the credit).

A covered call has essentially three possibilities:

The stock can stay flat, leaving the out-of-the-money call to expire worthless. The investor keeps the premium and gains nothing on the purchased shares.

The stock can decline, at which point the option again expires worthless and the investor keeps the premium but takes a loss on the stock. In scenarios one and two, the covered call outperforms the stock side of the trade.

If DELL remains above the 15-strike between now and March expiration (in six trading days), the option will likely be exercised, capping the stock’s upside.

For more on DELL:

Selling long-term puts in Dell (NASDAQ: DELL)

Early Glance: Computer companies

Las Vegas Sands (NYSE: LVS) bear call spread

the ONN Idea Generating Platform — Fri, 12 Mar 2010 18:00:28 +0000

Think you can fade this rally in Las Vegas Sands Corp. (NYSE: LVS)? The March options, with a week of life left, are still offering some good premium for doing so. Selling this front-month 20-21 call spread for 25 cents means you will risk up to 75 cents if LVS climbs another 2.8% to get above the breakeven at $20.25. The high for the day currently is $19.89 and another rally to its intraday highs should garner even more than 25 cents for this spread.

LVS Credit Spread Trade Details:

LVS is currently trading at $19.63, up roughly 1.5% today.

Credit Spread/Bear Call Spread–

Sell the March 20 call (out-of-the-money)
Buy the March 21 call (out-of-the-money)
Net credit of $0.25 per spread

By opening a free virtual trading account, you can build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum Profit: $0.25 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $0.75 (the difference between strikes minus the credit collected).

Breakeven: $20.25 (the strike of the lower call plus the premium).

For more on LVS:

Betting on downside in Las Vegas Sands (NYSE: LVS)

Put sellers bet on Las Vegas Sands (NYSE: LVS)

Visa (NYSE: V) bull call spread

the ONN Idea Generating Platform — Fri, 12 Mar 2010 16:35:00 +0000

Visa Inc. (NYSE: V) is a financial technology services leader that continues to benefit from the transactions side of the credit business as the much-exaggerated death of the American consumer turns out to be mere rumor. Today’s surprising retail sales figures in light of East coast snowstorms that were supposed to have kept shoppers home, are only adding to optimism about the strength of personal balance sheets and spending habits. This June bull call spread looks to take advantage of that trend and to capture a potential 390% return on risk as inflation remains low and people survive high unemployment and record foreclosures, while they get more and more done with the convenience of plastic.

V Debit Spread Trade Detail

V is currently trading at $93.01, up around 0.4% this morning.

Debit Spread/Bull Call Spread -

Buy the June 100 call (out-the-money)
Sell the June 105 call (out-the-money)
Net debit of $1.02 or less

Profit/Loss Details: A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for this trade.

Maximum risk: $1.02 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $3.98 (the difference between strike prices -5 – minus the debit). Return on risk is 390%.

Breakeven: $101.02 (the strike price of the purchased call plus the debit paid).

For more on V:

Visa: US credit payments volume rises in Feb.

Cramer’s take on Visa (NYSE: V), potential winning trades

Financial Select Sector SPDR (NYSE: XLF) iron condor

the ONN Idea Generating Platform — Fri, 12 Mar 2010 15:16:38 +0000

Financial stocks continue to gain ground as banks heal and the housing market bottoms, and the Financial Select Sector SPDR (NYSE: XLF) reflects this in a 15% rise since the February lows. While new 52-week highs above $15.76 look likely soon, this relatively low-volatility ETF will probably trade in a range between $15 and $17 for the next few months. This June short iron condor can capture a potential 67% return on risk to June expiration.

Iron Condor Trade Details:

The XLF is currently trading at $15.64, up roughly 0.3% today.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the June 15 put
Buy the June 14 put
Net credit of $0.25 per spread

Iron Condor Part II: Bear Call Spread –

Sell the June 17 call
Buy the June 18 call
Net credit of $0.15 per spread

Overall credit for the four-legged spread: $0.40

Profit/Loss Details:

A picture is worth 1,000 words – visualize the maximum profit, maximum loss, and the breakeven levels of this trade using the graphing tools in a free virtual trading account.

Maximum profit: $0.40 (the total premium collected) minus commissions.

Maximum risk: $0.60 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 66% for this strategy.

Upper breakeven price: $17.40 (the strike of the sold call plus the total premium).

Lower breakeven price: $14.60 (the strike of the sold put minus the total premium).

Goldman Sachs (NYSE: GS) Bull Put Spread

the ONN Idea Generating Platform — Thu, 11 Mar 2010 19:30:07 +0000

FBR Capital reiterated its outperform rating on Goldman Sachs (NYSE: GS) and has set the price target at $190. The financials have been on quite a tear, with the Financial Select Sector SPDR (NYSE: XLF) up nine days straight. While it looks like the financials are back in vogue, the Idea Generating Platform has found a bull put spread that gives the stock some breathing room over the next month or so, just in case the trend slows down.

GS Credit Spread Trade Details:

GS is currently trading at $172.35, up 41 cents so far on the day.

Credit Spread/Bull Put Spread–

Sell the April 160 put
Buy the April 150 put
Net credit of $1.35 per contract

By opening a free virtual trading account , you can visualize the risk/reward dynamics of this bull put spread.

Profit/Loss Details:

Maximum profit: $1.35 (the credit collected).

Maximum risk: $8.65 (the difference between strikes minus the credit collected). Return on risk is about 15%.

Breakeven: $158.65 (the strike of the short put minus the premium).

For more on GS:

Traders prepare for a drop in Goldman Sachs (NYSE: GS)

Goldman Sachs Group (NYSE: GS) bull call spread

S&P 500 Index (SPX) Bear Call Spread

the ONN Idea Generating Platform — Thu, 11 Mar 2010 18:00:31 +0000

The S&P 500 Index (NYSE: SPX) may be showing a bit of weakness today after putting in a strong February. The index may have a tough time advancing much higher than 1150 by next Friday. If you think the index has run out of steam and will stay below 1165 by next week, the Idea Generating Platform (IGP) has found a vertical bear call spread in March that you can sell.

SPX Credit Spread Trade Details:

The SPX is currently trading at $1,142.08, down roughly 0.3% today.

Credit Spread/Bear Call Spread–

Sell the March 1165 call (out-of-the-money)
Buy the March 1180 call (out-of-the-money)
Net credit of $1.50 per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum Profit: $1.50 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $13.50 (the difference between strikes minus the credit collected).

Breakeven: $1166.50 (the strike of the lower call plus the premium).

FedEx Corp. (NYSE: FDX) covered call

the ONN Idea Generating Platform — Thu, 11 Mar 2010 16:40:44 +0000

FedEx Corp. (NYSE: FDX) is set to report its third-quarter earnings on Thursday, March 18 . The 21 analysts that cover the shipping company expect FDX to announce earnings between 70 cents per share and 82 cents per share (the consensus is 72 cents a share). FDX weathered the economic downturn and was able to manage costs while maintaining service levels during that period. ONN.tv’s Idea Generating Platform found an in-the-money covered call that offers a slight hedge against a pullback, but limits your upside. This trade is good if you believe FDX will drop to the $85 level, but not much farther.

FDX Covered Call Trade Details:

FDX is currently trading at $86.30, down roughly 1.1% today.

Covered Call –

Sell the March 85 call (in-of-the-money) for $2.70 per contract (or better).
Buy 100 shares of stock for every sold call (current price for 100 shares is $8,629).

A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for covered call trade.

Profit/Loss Details:

Maximum potential profit:, if assigned, is $1.40. Return on risk is approximately 1.7%.

Maximum risk: $83.60 (the stock price at the time of purchase minus the credit).

Breakeven: $83.60 (the stock price at the time of purchase minus the credit).

A covered call has essentially three possibilities:

The stock can stay flat, leaving the out-of-the-money call to expire worthless. The investor keeps the premium and gains nothing on the purchased shares.

The stock can decline, at which point the option again expires worthless and the investor keeps the premium but takes a loss on the stock. In scenarios one and two, the covered call outperforms the stock side of the trade.

If FDX remains above the 85-strike between now and March expiration (in eight trading days), the option will likely be exercised, capping the stock’s upside.

For more on FDX:

FedEx Corporation (NYSE:FDX) iron butterfly

FedEx Corporation (NYSE: FDX) bear call spread

Deere & Co. (NYSE: DE) bull call spread

the ONN Idea Generating Platform — Thu, 11 Mar 2010 15:19:30 +0000

John Deere (NYSE: DE) has been in a range for some time and with the recent pullback is approaching its support level of $55.00, which is where the 50-day moving average resides. If you think DE can hold that level and want to use the recent weakness as a buying opportunity, you may want to examine the following in-the-money bull call spread.

DE Debit Spread Trade Detail

DE is currently trading at $57.70, down about 1.3% this morning.

Debit Spread/Bull Call Spread -

Buy the April 50 call (in-the-money)
Sell the April 55 call (in-the-money)
Net debit of $4.15 or less

Profit/Loss Details:

A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for this trade.

Maximum risk: $4.15 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $0.85 (the difference between strike prices -2 – minus the debit). Return on risk is 20%.

Breakeven: $54.15 (the strike price of the purchased call plus the debit paid).

For more on DE:

Deere Eases More Than 1.5%; Says It’s Reviewing Strategic Alternatives for Wind Energy Business

PACCAR Inc. (NASDAQ: PCAR) Bear Call Spread

the ONN Idea Generating Platform — Wed, 10 Mar 2010 19:30:36 +0000

PACCAR Inc. (NASDAQ: PCAR) is once again bouncing around its 52-week high of $40.26. For investors who think that $40 could prove to be a resistance level again and the stock could stay below this level, here is a bear call spread.

PCAR Credit Spread Trade Details:

PCAR is currently trading at $39.46, down around 14 cents, or 0.4%, today.

Credit Spread/Bear Call Spread–

Sell the May 40 call
Buy the May 41 call
Net credit of $0.30 per spread

By opening a free virtual trading account, you can build a profit/loss diagram to help visualize the risk/reward dynamics of trade.

Profit/Loss Details:

Maximum Profit: $0.30 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $0.70 (the difference between strikes minus the credit collected). Return on risk is 43% for this strategy.

Breakeven: $40.30 (the strike of the lower call plus the premium).

For more on PCAR:

PACCAR (NASDAQ: PCAR) bull put spread

PACCAR (NASDAQ: PCAR) iron condor

SPDR Gold Shares (NYSE: GLD) bear put spread

the ONN Idea Generating Platform — Wed, 10 Mar 2010 17:58:38 +0000

Shares of SPDR Gold Shares (NYSE: GLD) is down more than 1% today. For investors who think that the stock will continue to trend lower, here is a bear put spread.

GLD Debit Spread Trade Details:

GLD is currently trading at $108.44, down about 1.1% today.

Debit Spread, Bear Put Spread–

Buy the May 104 put
Sell the May 103 put
Net debit of $0.30 or less

By opening a free virtual trading account, you can build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum risk: $0.30 (the premium paid for the spread) plus commissions.

Maximum potential profit: $0.70 (the difference between strike prices – 1 – minus the debit). Return on risk is roughly 42%.

Breakeven: $103.70 (the strike price of the purchased put minus the debit paid).

For more on GLD:

GLD Update: Have we seen the lows for 2010?

Gold (NYSE: GLD) buying opportunity around the corner

EMC Corp. (NYSE: EMC) bull put spread

the ONN Idea Generating Platform — Wed, 10 Mar 2010 16:30:21 +0000

EMC Corp. (NYSE: EMC) is hitting a new 52-week high today, and trades for roughly 14.4 times analysts’ estimates. For investors who think the stock could hold these levels or keep moving higher, here is a bull put spread from ONN.tv’s Idea Generating Platform.

EMC Credit Spread Trade Details:

EMC is currently trading at $18.80, up roughly 1.4% today.

Credit Spread/Bull Put Spread–

Sell the June 18 put
Buy the June 17 put
Net credit of $0.27 for the spread

By opening a free virtual trading account, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.27 (the credit collected).

Maximum risk: $0.73 (the difference between strikes minus the credit collected). Return on risk is approximately 36% in roughly four months.

Breakeven: $17.73 (the strike of the short put minus the premium).

For more on EMC:

A case for limited upside in EMC (NYSE: EMC)

Bullishness in Applied Materials, Humana, EMC

Ford Motor Co. (NYSE: F) Bear Call Spread

the ONN Idea Generating Platform — Wed, 10 Mar 2010 15:36:52 +0000

Ford Motor Co. (NYSE: F) shares are now trading around their highest levels in five years. For investors who think that the stock might be due for a pullback, or could at least hold current levels, here is a bear call spread.

F Credit Spread Trade Details:

F is currently trading at $12.88, up around eight cents, or 0.6%, today.

Credit Spread/Bear Call Spread–

Sell the April 13 call (out-of-the-money) for $0.52 per contract.
Buy the April 14 call (out-of-the-money) for $0.20 per contract.
Net credit of $0.32 per spread

By opening a free virtual trading account, you can build a profit/loss diagram to help visualize the risk/reward dynamics of trade.

Profit/Loss Details:

Maximum Profit: $0.32 (the credit collected). This excludes commmissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $0.68 (the difference between strikes minus the credit collected).

Breakeven: $13.32 (the strike of the lower call plus the premium).

Whole Foods Market (NASDAQ: WFMI) bull call spread

the ONN Idea Generating Platform — Wed, 10 Mar 2010 13:28:30 +0000

Whole Foods Market Inc. (NASDAQ: WFMI) had a blow-out quarter and analysts expect the grocery company’s earnings to grow at 14.8% for the next year moving forward. Kroger (NYSE: KR) also beat expectations, coming in five cents higher than consensus estimates. Is this a trend we are seeing in the grocery stores? Is the consumer really coming back?

For traders who believe WFMI will continue to grow and report strong growth for its industry, ONN.tv’s Idea Generating Platform found an in-the-money bull call spread in April.

WFMI Debit Spread Trade Detail

WFMI closed at $35.31, yesterday, falling 1.6%.

Debit Spread/Bull Call Spread -

Buy the April 33 call (in-the-money)
Sell the April 35 call (in-the-money)
Net debit of $1.43 or less

Profit/Loss Details:

A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for this trade.

Maximum risk: $1.43 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $0.57 (the difference between strike prices -2 – minus the debit). Return on risk is 39%.

Breakeven: $34.43 (the strike price of the purchased call plus the debit paid).

For more on WFMI:

Whole Foods Market (WFMI) Bear Call Spread

Looking for a winner in Whole Foods (NASDAQ: WFMI)

Rambus (NASDAQ: RMBS) Bull Put Spread

the ONN Idea Generating Platform — Tue, 09 Mar 2010 18:00:38 +0000

Rambus Inc. (NASDAQ: RMBS) yesterday announced an analysts’ meeting on March 23, 2010. The company will offer its strategic and financial overview and potentially offer its analysts more insight into the company and its management. This could turn out to be a bullish event. The stock’s 20-day simple moving average is right around $22, with some more support in the $21.50 area. If you’re bullish on RMBS going into this analyst meeting, ONN.tv’s Idea Generating Platform spotted a bull put spread in April that could put the odds in your favor.

RMBS Credit Spread Trade Details:

RMBS is currently trading at $22.66, down 10 cents so far on the day.

Credit Spread/Bull Put Spread–

Sell the April 21 put
Buy the April 19 put
Net credit of $0.42 per contract

By opening a free virtual trading account , you can visualize the risk/reward dynamics of this bull put spread.

Profit/Loss Details:

Maximum profit: $0.42 (the credit collected).

Maximum risk: $1.58 (the difference between strikes minus the credit collected). Return on risk is about 26%.

Breakeven: $20.58 (the strike of the short put minus the premium).

For more on RMBS:

Rambus In. (NASDAQ: RMBS) iron condor

Selling Rambus (NASDAQ: RMNS) upside

Rambus shares drop on larger 4Q loss

Citigroup (NYSE: C) covered call

the ONN Idea Generating Platform — Tue, 09 Mar 2010 16:30:32 +0000

Update: As of 1:05 pm Eastern Time, C shares are up nearly 7%. According to CNN Money, money manager Bruce Berkowitz noted that the worst in the shares is over; elsewhere, research firm CreditSights said the company is “back in business.” This positive news is driving buyers into the shares, which is also lifting premiums on the April 4 call.

Citigroup Inc. (NYSE: C) is under pressure to downsize and partially dismantle its massive operations. Citigroup still owes a large amount of TARP money to the taxpayers, not to mention its stock has been stuck below $4.00 since December.

Because of Citi’s low share price, the options choices are limited, but at the same time, the low-dollar premiums are a decent percentage of risk. If you think that C will continue to have a tough time getting above $4.00, the covered call strategy may offer some increase to your total portfolio return. It can be repeated month after month to steadily collect premium. This covered call can also be used to capture some additional premium if you think C may stall after this rally.

Citigroup’s low share price also means traders are able to take a larger position (as we have previously pointed out, 1,000 shares of a $3.57 stock is akin to 100 shares of a stock worth $35.70). Consider the impact of your commissions before placing a large order.

C Covered Call Trade Details:

C is currently trading at $3.62, up roughly 1.7% today.

Covered Call –

Sell the April 4 call (out-of-the-money) for $0.06 per contract (or better).
Buy 100 shares of stock for every sold call (current price for 100 shares is $362).

A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for this trade.

Profit/Loss Details:

Maximum potential profit:, if assigned, is $0.44 (the premium received plus the difference between the strike price and the stock purchase price). Return on risk is approximately 12%.

Maximum risk: $3.56 (the stock price at the time of purchase minus the credit).

Breakeven: $3.56 (the stock price at the time of purchase minus the credit).

A covered call has essentially three possibilities:

The stock can stay flat, leaving the out-of-the-money call to expire worthless. The investor keeps the premium and gains nothing on the purchased shares.
The stock can decline, at which point the option again expires worthless and the investor keeps the premium but takes a loss on the stock. In scenarios one and two, the covered call outperforms the stock side of the trade.
If C rises above the 4 strike between now and April expiration, the option will likely be exercised, capping the stock’s upside.

For more on C:

Citigroup Inc. (NYSE: C) iron condor

JPMorgan Chase (NYSE: JPM) bull call spread

the ONN Idea Generating Platform — Tue, 09 Mar 2010 14:56:28 +0000

JP Morgan Chase & Co. (NYSE: JPM) is now the world’s largest hedge fund firm when measured by assets, according to Pensions and Investments magazine. It also recently received an upgrade from Morgan Stanley. The stock is off slightly today, but if you believe that JPM will continue to excel in the sector, you might want to examine the in-the-money bull call spread below. JPM’s bank did not post a quarterly loss at anytime during the recent downturn, which can be viewed as strength.

JPM Debit Spread Trade Detail

JPM is currently trading at $42.21, down about 0.9% this morning.

Debit Spread/Bull Call Spread -

Buy the April 39 call (in-the-money)
Sell the April 41 call (in-the-money)
Net debit of $1.50 or less

Profit/Loss Details:

A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for this trade.

Maximum risk: $1.50 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $0.50 (the difference between strike prices -2 – minus the debit). Return on risk is 33%.

Breakeven: $40.50 (the strike price of the purchased call plus the debit paid).

For more on JPM:

DIAMONDS ETF (AMEX: DIA) iron condor

the ONN Idea Generating Platform — Mon, 08 Mar 2010 19:51:33 +0000

Will the Dow (AMEX: DIA) stay between 10,000 and 11,100 into May? This short iron condor could offer a potential 64% return on risk if the DIA ETF follows suit for the next 74 days until May expiration.

Iron Condor Trade Details:

The DIA is currently trading at $105.66, down roughly 0.09% today.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the May 100 put
Buy the May 99 put
Net credit of $0.20 per spread

Iron Condor Part II: Bear Call Spread –

Sell the May 111 call
Buy the May 112 call
Net credit of $0.20 per spread

Overall credit for the four-legged spread: $0.40

By opening a free virtual trading account, investors can evaluate the risk/reward dynamics of this iron condor.

Profit/Loss Details:

Maximum profit: $0.40 (the total premium collected) minus commissions.

Maximum risk: $0.60 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 66% for this strategy.

Upper breakeven price: $111.40 (the strike of the sold call plus the total premium).

Lower breakeven price: $99.60 (the strike of the sold put minus the total premium).

More on DIA:

Case for the cautious bull

Cree Inc. (NASDAQ: CREE) Cash-Secured Put

the ONN Idea Generating Platform — Mon, 08 Mar 2010 18:16:39 +0000

Cree Inc. (NASDAQ: CREE) has been in a strong uptrend for the past year and may be due to trade sideways before it resumes its bull run. An important area of support is building above $60, with both 20- and 50-day moving averages sloping positive there and the prior swing low at around $64. For investors who are already bullish on this maker of advanced semiconductors and electronics for LED technologies, this April cash-secured put offers an opportunity to collect premium and risk being assigned the shares at an effective cost basis of $62.50.

CREE Cash-Secured Put Trade Details:

CREE shares are trading at $67.68, down roughly 1.5% today.

Cash-Secured Put –

Sell the CREE April 65 put (out-of-the-money) for $2.50 per contract
Net credit of $2.50 ($250)
For every contract, set aside $6,250 in cash: [(65 – 2.50) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, you’ll have purchased CREE shares at an effective price of $62.50, or roughly 7% less than they are currently priced.

Profit/Loss Details:

Maximum potential profit: $2.50 per contract (the premium collected) minus commissions (this profit is for the short put option only and may change if the investor opts to buy the stock at $62.50).

Maximum risk: $62.50 (the strike price minus the premium collected). Return on risk for this trade is 4%.

Breakeven: $62.50 (the strike price minus the premium collected).

For more on CREE:

Cree Inc. (NASDAQ: CREE) bear call spread

Investors mixed post-earnings in Cree, BAC

State Street Corporation (NYSE: STT) iron condor

the ONN Idea Generating Platform — Mon, 08 Mar 2010 16:30:50 +0000

State Street Corporation (NYSE: STT) shares have been quietly trending higher since bottoming out above $40 in mid-December. For investors who think they can profit from a $7-wide trading range in the stock over the next 39 days to April expiration, this short iron condor may offer the right risk/reward potential. With a virtual trading account, you can quickly build charts to illustrate the risk/reward of all your potential option trades.

Iron Condor Trade Details:

STT is currently trading at $45.37, down roughly 0.6% today.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the April 42 put
Buy the April 41 put
Net credit of $0.15 per spread

Iron Condor Part II: Bear Call Spread –

Sell the April 49 call
Buy the April 50 call
Net credit of $0.20 per spread

Overall credit for the four-legged spread: $0.35

Profit/Loss Details:

Maximum profit: $0.35 (the total premium collected) minus commissions.

Maximum risk: $0.65 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 54% for this strategy.

Upper breakeven price: $49.35 (the strike of the sold call plus the total premium).

Lower breakeven price: $41.65 (the strike of the sold put minus the total premium).

More on STT:

State Street (NYSE: STT) overcomes resistance

State Street Corp. reaches $300M settlement

Monsanto (NYSE: MON) bull call spread

the ONN Idea Generating Platform — Mon, 08 Mar 2010 15:27:21 +0000

Shares of Monsanto Company (NYSE:MON) have fallen more than 18% since their January highs above $86. In late February, the company reaffirmed fiscal 2010 earnings guidance of between $3.10 and $3.30 per share and the stock appears to be finding support above $70 this month, but today’s strong opening that took shares to $73 has been rejected by sellers.

With MON now trading around $72, bullish investors might consider opportunities to establish long call plays. This July bull call spread offers a favorable risk/reward play for those who believe that the agricultural bull will resume ahead of strong grain prices and rising demand in the Northern Hemisphere growing season.

MON Debit Spread Trade Detail

MON is currently trading at $72.09, down about half a percent this morning.

Debit Spread/Bull Call Spread -

Buy the July 80 call (out-of-the-money)
Sell the July 85 call (out-of-the-money)
Net debit of $0.92 or less

Profit/Loss Details:

A free virtual trading account can help you visualize the maximum profit, maximum loss, and breakeven level for this trade.

Maximum risk: $0.92 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $4.08 (the difference between strike prices -5 – minus the debit). Return on risk is approximately 443%.

Breakeven: $80.92 (the strike price of the purchased call plus the debit paid).

For more on MON:

Federal regulators launch probe of big agriculture

OTM call buying in Monsanto (NYSE: MON)

International Business Machines (NYSE: IBM) bull put spread

the ONN Idea Generating Platform — Fri, 05 Mar 2010 19:30:35 +0000

International Business Machines Corp. (NYSE: IBM) has underperformed the S&P 500 for the past year by nearly 20%. If you believe that this tech bellwether, with its broad exposure to enterprise-level storage solutions and new “smart grid” Intelligent Utility Networks, will play along with the broad rally—if not catch up altogether—then this bull put spread offers a conservative way to play that idea.

IBM Credit Spread Trade Details:

IBM is currently trading at $127.21.

Credit Spread/Bull Put Spread–

Sell the April 125 put for $1.86 per contract.
Buy the April 120 put for $0.78 per contract.
Net credit of $1.08 per contract

By opening a free virtual trading account , you can visualize the risk/reward dynamics of this bull put spread.

Profit/Loss Details:

Maximum profit: $1.08 (the credit collected).

Maximum risk: $3.92 (the difference between strikes minus the credit collected). Return on risk is about 27%.

Breakeven: $123.92 (the strike of the short put minus the premium).

For more on IBM:

IBM vs. S&P 500: Seeing quality outperformance

A change for option market makers?

Winners and losers in IBM

Toronto-Dominion Bank (NYSE: TD) covered call

the ONN Idea Generating Platform — Fri, 05 Mar 2010 18:18:02 +0000

Toronto-Dominion Bank (NYSE: TD) reported a great quarter yesterday, doubling profits from a year earlier. Canadian banks are doing well on the back of a very strong economy and the fact they didn’t have much exposure to subprime issues. The bank had to set aside only US $500 million for loan losses, down 18% from a year ago.

With strong performance in Canadian consumer banking and investment banking, the company is optimistic about other business units in U.S. banking and the Ameritrade brokerage catching up. This buy-write/covered call takes advantage of the stock’s breakout above $65 for investors who want to own this name with a slight cushion.

TD Covered Call Trade Details:

TD is currently trading at $68.73, up roughly 1.5% today.

Covered Call –

Sell the July 70 call (out-of-the-money) for $2.35 per contract (or better).
Buy 100 shares of stock for every sold call (current price for 100 shares is $6,873).

A virtual trading account can help you construct a profit/loss diagram to help visualize the risk/reward dynamics of this covered call trade.

Profit/Loss Details:

Maximum potential profit:, if assigned, is $3.62 (the premium received plus the difference between the strike price and the stock purchase price). Return on risk is approximately 5.5%.

Maximum risk: $66.38 (the stock price at the time of purchase minus the credit).

Breakeven: $66.38 (the stock price at the time of purchase minus the credit).

A covered call has essentially three possibilities:

The stock can stay flat, leaving the out-of-the-money call to expire worthless. The investor keeps the premium and gains nothing on the purchased shares.
The stock can decline, at which point the option again expires worthless and the investor keeps the premium but takes a loss on the stock. In scenarios one and two, the covered call outperforms the stock side of the trade.
If TD rises above the 70 strike between now and July expiration, the option will likely be exercised, capping the stock’s upside.

For more on TD:

Canada Turns Modestly Higher After Mixed Morning Trade

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.

InterMune Inc. (NASDAQ: ITMN) iron condor

the ONN Idea Generating Platform — Fri, 05 Mar 2010 16:37:10 +0000

InterMune Inc. (NASDAQ: ITMN) shares have been up as much as $10.76 to $25.37 this morning in regular trading, more than 73% higher than yesterday’s close, on news that the FDA may be taking a less critical view of the company’s data on its experimental lung medicine, pirfenidone. Pre-market action saw the stock even higher, up over $12 and 85%. This was part of an expected news flow for the company that we were anticipating last month when we saw the extremely high implied volatility of the March options.

From Bloomberg.com reporting by Catherine Larkin:

Pirfenidone is being reviewed for idiopathic pulmonary fibrosis, or IPF, an unexplained scarring and inflammation of the lungs. It would be InterMune’s first promoted product and the only treatment designed for the estimated 100,000 Americans with the disease, most of whom [sic] die within two to five years after diagnosis, the company said.

The FDA posted a report on its website overnight that was less critical of ITMN’s research than biotech investors had been expecting. What is key about today’s news is that we weren’t expecting any official FDA announcement until March 9.

Even as the stock settles back down below $25, implied volatility in the March options is still very high – well-over 200%. This is because we still don’t have all the news from the FDA’s approval process, which won’t be fully known until May 4. But for investors who want to take advantage of this extraordinarily high option volatility, this iron condor offers the opportunity to earn a potential 100% return on risk.

Iron Condor Trade Details:

ITMN is currently trading at $23.92, up roughly 64% today.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the March 15 put
Buy the March 10 put
Net credit of $1.35 per spread

Iron Condor Part II: Bear Call Spread –

Sell the March 30 call
Buy the March 35 call
Net credit of $1.15 per spread

Overall credit for the four-legged spread: $2.50

With a virtual trading account , you can build profit/loss charts to help visualize the risk/reward dynamics of this and other strategies.

Profit/Loss Details:

Maximum profit: $2.50 (the total premium collected) minus commissions.

Maximum risk: $2.50 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 100% for this strategy.

Upper breakeven price: $32.50 (the strike of the sold call plus the total premium).

Lower breakeven price: $12.50 (the strike of the sold put minus the total premium).

More on ITMN:

Potash Corp./Saskatchewan (NYSE: POT) iron condor

the ONN Idea Generating Platform — Fri, 05 Mar 2010 15:27:25 +0000

Optimism about materials and commodity sectors is keeping the stocks in vogue, especially as the global recovery gains solid footing. If you think Potash (NYSE: POT) will continue its rally off of key support at $100, but that the stock will make only marginal new highs above $125 in the next few months, this June short iron condor may be one way to play that thesis. You could realize a potential 50% return on risk if the stock stays in a $40-wide range for the next 105 days.

And a smaller profit is still possible if POT trades in this range and you can close the spread before June expiration. To see what the chances are that POT stays between $95 and $135, based on the implied volatility of the options—which is really the market’s best expectation of future price movement— consider using a Probability Calculator and plug these prices in for June expiration.

Iron Condor Trade Details:

POT is currently trading at $116.25, up roughly 1.2% today.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

p>Iron Condor Part I: Bull Put Spread –

Sell the June 95 put
Buy the June 90 put
Net credit of $0.85 per spread

Iron Condor Part II: Bear Call Spread –

Sell the June 135 call
Buy the June 140 call
Net credit of $0.80 per spread

Overall credit for the four-legged spread: $1.65

With a virtual trading account , you can build profit/loss charts to help visualize the risk/reward dynamics of this and other strategies.

Profit/Loss Details:

Maximum profit: $1.65 (the total premium collected) minus commissions.

Maximum risk: $3.35 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 50% for this strategy.

Upper breakeven price: $136.65 (the strike of the sold call plus the total premium).

Lower breakeven price: $93.35 (the strike of the sold put minus the total premium).

More on POT:

Highlighting upside break-out in GLD, Intrepid Potash options action

Limited downside in Potash (NYSE: POT)?

Potash Corp. Saskatchewan (NYSE: POT) cash-secured put

iShares Russell 2,000 Index (IWM) Bear Call Spread

the ONN Idea Generating Platform — Thu, 04 Mar 2010 19:30:22 +0000

The iShares Russell 2,000 Index (NYSE: IWM), which is comprised of smaller, less established, typically more volatile companies had a very strong February (along with the rest of the indices). The IWM is an ETF that tracks the movements of the Russell 2,000 index, has moved from a low of $58 to its current level of roughly $65, a $7-shift (or 12% move) in one month. The 200-week moving average is above the current levels of the IWM and comes in at roughly $66.50 – this could prove to be resistance and this bearish trade could offer a hedge against your existing long positions. If you feel we could see a slight reversion to the mean, the IWM may move faster than the large-cap indices.

IWM Credit Spread Trade Details:

The IWM is currently trading at $65.03, down roughly 0.15% today.

Credit Spread/Bear Call Spread–

Sell the March 66 call (out-of-the-money) for $0.55 per contract.
Buy the March 68 call (out-of-the-money) for $0.10 per contract.
Net credit of $0.45 per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $0.45 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $1.55 (the difference between strikes minus the credit collected).

Breakeven: $66.45 (the strike of the lower call plus the premium).

Amgen, Inc. (NASDAQ: AMGN) bear put spread

the ONN Idea Generating Platform — Thu, 04 Mar 2010 18:00:20 +0000

There is a pennant forming in the daily chart of Amgen, Inc. (NASDAQ: AMGN); typically this precedes a large breakout. The Average True Range of the stock has also been drifting lower, which also can be read as a contrarian signal of a large move. Just based on technical factors alone, the stock looks like it could break lower, possible down to the 54 level intraday.

If you agree with this thesis, you may want to examine the following bear put spread, which is partially in-the-money.

AMGN Debit Spread Trade Details:

AMGN is currently trading at $56.59, down about 0.5% today.

Debit Spread, Bear Put Spread–

Buy the April 57.50 put
Sell the April 55 put
Net debit of $1.10 or less

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum risk: $1.10 (the premium paid for the spread). Plus commissions.

Maximum potential profit: $1.40 (the difference between strike prices – 2.50 – minus the debit). Return on risk is roughly 127%.

Breakeven: $56.40 (the strike price of the purchased put minus the debit paid).

Apple (NASDAQ: AAPL) options trading idea

the ONN Idea Generating Platform — Thu, 04 Mar 2010 16:30:25 +0000

Shares of Apple Inc. (NASDAQ: AAPL) hit an all time closing high on Jan. 19, in anticipation of the iPad unveiling. History showed us a classic buy-the-rumor, sell-the-news trading pattern, shares of AAPL consolidated all the way to a close of $192, before resuming a march higher above the $200-level. We would argue that this recent price action makes it likely that even if AAPL tests the 200-level again, it will hold the line.

AAPL Credit Spread Trade Details:

AAPL is currently trading at $209.58.

Credit Spread/Bull Put Spread–

Sell the March 200 put for $1.10 per contract.
Buy the March 195 put for $0.60 per contract.
Net credit of $0.50 per contract

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize this AAPL trade.

Profit/Loss Details:

Maximum profit: $0.50 (the credit collected).

Maximum risk: $4.50 (the difference between strikes minus the credit collected). Return on risk is about 11%.

Breakeven: $199.50 (the strike of the short put minus the premium).

For more on AAPL:

Jared Levy – Fast Money Sector Trade: Wireless Wars

Bull and bear plays on Apple (NASDAQ: AAPL)

Retail HOLDrs Trust (NYSE: RTH) bull call spread

the ONN Idea Generating Platform — Thu, 04 Mar 2010 15:00:40 +0000

Even the snow could not stop the shoppers this past month; the nation’s retailers, even many of the boutique firms, posted stronger-than-expected same-store-sales growth in February. This improvement in sales could be perceived as very bullish and one way to play this strength is through the Retail HOLDRs Trust (NYSE: RTH). Our Idea Generating Platform (IGP) found an in-the-money bull call spread for investors who think this retailing strength should continue through April.

RTH Debit Spread Trade Detail

The RTH is currently trading at $97.15. The ETF is up roughly half a percent today and has reached a new 52-week high.

Debit Spread/Bull Call Spread -

Buy the April 90 call (in-the-money)
Sell the April 95 call (in-the-money)
Net debit of $4.30 or less

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum risk: $4.30 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $0.70 (the difference between strike prices -5 – minus the debit of $4.30). Return on risk is approximately 16% in 43 days.

Breakeven: $94.30 (the strike price of the purchased call plus the debit paid).

MGM Mirage (NYSE:MGM) Cash-Secured Put

the ONN Idea Generating Platform — Wed, 03 Mar 2010 18:59:21 +0000

A look at the chart for MGM Mirage (NYSE: MGM) shows just how range bound this stock has been for the last six months – it seems hard-pressed to go back below $10. Just today we saw an investor sell the March-April 15 calendar spread for two cents per spread suggesting at least one investor is moderately bullish on the casino name. Other investors who also believe the stock will stay above $10 throughout the later-term could look at this cash-secured put.

MGM Cash-Secured Put Trade Details:

MGM shares are trading at $11.09

Cash-Secured Put –

Sell the MGM June 11 put (at-the-money) for $1.31 per contract
Net credit of $1.31($131)
For every contract, set aside $969 in cash: [(11-1.31) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, you’ll have purchased MGM shares at an effective price of $9.69, or 12% less than they are currently priced.

Profit/Loss Details:

Maximum potential profit: $1.31 per contract (the premium collected) minus commissions (this profit is for the short put option only and may change if the investor opts to buy the stock at $9.69).

Maximum risk: $9.69 (the strike price minus the premium collected). Return on risk for this trade is 13%.

Breakeven: $9.69 (the strike price minus the premium collected).

Priceline.com (NASDAQ: PCLN) short straddle

the ONN Idea Generating Platform — Wed, 03 Mar 2010 18:00:47 +0000

ThinkEquity initiated coverage on Priceline.com Incorporated (NASDAQ: PCLN) today with a “hold” rating. For investors who also believe the stock may be stuck in a range, here is a short straddle play.

PCLN Strangle Trade Details:

PCLN is currently trading at $236.65, down almost 2% today.

Short Straddle –

Sell the October 240 call
Sell the October 240 put
Net credit of $56.80

Profit/Loss Details:

Maximum profit: $56.80 (the credit collected), minus commissions. The investor will keep the full premium if PCLN is trading exactly at 240 at October options expiration.

Maximum risk: Risk is theoretically unlimited to the upside if PCLN rallies and limited to $183.20 if the stock declines all the way to zero.

Upper Breakeven: $296.80 (the strike price plus the credit collected).

Lower Breakeven: $183.20 (the strike price minus the credit collected).

For more on PCLN:

Forecast Report Update: PCLN Long Trade Nets 4.8%

Winners and Losers in Priceline.com Trades

Yahoo! Inc. (YHOO) long call

the ONN Idea Generating Platform — Wed, 03 Mar 2010 16:45:04 +0000

Implied volatility in the marketplace has declined precipitously. For bullish investors in Yahoo! Inc. (NASDAQ: YHOO) who think the stock could regain its 52-weeks highs in the next several months, here is a long call idea that could yield a decent return on investment.

YHOO Long Call Trade Details:

YHOO is currently trading at $15.80, up about 0.5% today.

Long Call –

Buy the October 16 call for $1.35 or less
Net debit of $1.35 or better per contract

Build a profit/loss diagram of this trade with a free virtual trading account from OptionsHouse.

Profit/Loss Details:

Maximum Profit: Maximum profit for a long call is theoretically unlimited if the underlying stock rallies above the breakeven price.

Maximum Risk: $1.35 (the amount paid for the contract).

Breakeven: $17.35 (the call strike plus the premium paid).

For more on YHOO:

Yahoo CEO indicates turnaround could take years

Winners and Losers in Yahoo Inc. (YHOO)

Looking for slides in Yahoo! (NASDAQ: YHOO), Altera (NASDAQ: ALTR)

Exxon Mobil (NYSE: XOM) Cash-Secured Put

the ONN Idea Generating Platform — Wed, 03 Mar 2010 16:20:09 +0000

Shares of Exxon Mobil (NYSE: XOM) are down on the year, compared to the rallying S&P 500. Investors who expect the stock to experience limited downside could consider this cash-secured put from ONN.tv’s Idea Generating Platform.

XOM Cash-Secured Put Trade Details:

XOM shares are trading at $65.57

Cash-Secured Put –

Sell the XOM April 65 put (near-the-money) for $1.40 per contract
Net credit of $1.40 ($50)
For every contract, set aside $6,360 in cash: [(65 – 1.40) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, you’ll have purchased XOM shares at an effective price of $63.60, or 3% less than they are currently priced.

Profit/Loss Details:

Maximum potential profit: $1.40 per contract (the premium collected) minus commissions. (This profit is for the short put option only and may change if the investor opts to buy the stock at $63.60).

Maximum risk: $63.60 (the strike price minus the premium collected). Return on risk for this trade is 2.2%.

Breakeven: $63.60 (the strike price minus the premium collected).

For more on XOM:

Moderate bullishness in Exxon Mobil (NYSE: XOM)

Exxon Mobil (NYSE: XOM) bull put spread

Google Inc. (NASDAQ: GOOG) iron condor

the ONN Idea Generating Platform — Tue, 02 Mar 2010 19:30:16 +0000

The front page of the March 1 edition of The Wall Street Journal talked about an increase in antitrust complaints against Google (NASDAQ: GOOG). It points to the parallels of what happened to Microsoft (NASDAQ: MSFT) in the ’90s as they fought through antitrust complaints. An argument could be made that for the long term, these mounting complaints might result in reduced growth for Google, or at least result in a long-term range-bound stock.

For investors who believe GOOG could be bound for a consolidation period, here is a January 2011 short iron condor. Note that it will take a long time (1o months or so) to realize the return.

Short Iron Condor Trade Details:

GOOG is currently trading at $542.75, up roughly 1.9% today.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the January 2011 510 put
Buy the January 2011 480 put
Net credit of $8.00 per spread

Iron Condor Part II: Bear Call Spread –

Sell the January 2011 570 call
Buy theJanuary 2011 600 call
Net credit of $11.00 per spread

Overall credit for the four-legged spread: $19.00

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $19.00 (the total premium collected) minus commissions.

Maximum risk: $11.00 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 173% for this strategy.

Upper breakeven price: $589.00 (the strike of the sold call plus the total premium).

Lower breakeven price: $491.00 (the strike of the sold put minus the total premium).

More on GOOG:

Google still considering how to proceed in China

Trading out of a Google (NASDAQ: GOOG) bull put spread

GOOG March iron butterfly

Freeport-McMoRan (NYSE: FCX) bull call spread

the ONN Idea Generating Platform — Tue, 02 Mar 2010 18:00:33 +0000

Base material stocks are strong like a bull today. The 52-week high on Freeport-McMoRan Copper & Gold (NYSE: FCX) is 90.55, reached back in January. For investors who think the shares will regain that level, here is a bull call spread.

FCX Debit Spread Trade Detail

FCX is currently trading at $77.68, up about 1.6% today.

Debit Spread/Bull Call Spread:

Buy the August 85 call
Sell the August 95 call
Net debit of $1.70 or less

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this and other option trades.

Profit/Loss Details:

Maximum risk: $1.70 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $8.30 (the difference between strike prices – 10.00 – minus the debit of $1.70), minus commissions. Return on risk is approximately 488% in 171 days.

Breakeven: $86.70 (the strike price of the purchased call plus the debit paid).

For more on FCX:

Traders hold a moderately bearish outlook on Freeport-McMoRan

Jobs Picture Reverts to the Mean

Winning and losing option plays in Freeport-McMoRan (NYSE: FCX)

MasterCard Incorporated (NYSE: MA) bull call spread

the ONN Idea Generating Platform — Tue, 02 Mar 2010 16:48:59 +0000

As the market begins to break into positive territory on the year, shares of MasterCard Incorporated (NYSE: MA) are still down 10% year to date. For investors who think that the stock could hit new highs, here is a bull call spread. For large-dollar stocks like MA, you are likely to trade fewer contracts. It helps to have a broker with a lower per-transaction cost.

MA Debit Spread Trade Detail

MA is currently trading at $232.50, down about 0.1% today.

Debit Spread/Bull Call Spread:

Buy the October 250 call
Sell the October 260 call
Net debit of $4.10 or less

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this and other option trades.

Profit/Loss Details:

Maximum risk: $4.10 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $5.90 (the difference between strike prices – 10.00 – minus the debit of $4.10). Return on risk is approximately 144% in 227 days.

Breakeven: $254.10 (the strike price of the purchased call plus the debit paid).

For more on MA:

Put selling in Mastercard (NYSE: MA) post-earnings

Energy Select Sector SPDR (NYSE: XLE) bull put spread

the ONN Idea Generating Platform — Tue, 02 Mar 2010 15:15:36 +0000

The Energy Select Sector SPDR (NYSE: XLE) has a 52-week high of $60.87, and is currently trading roughly 7% off that level. Just as the market begins to strengthen, investors who believe the XLE could revert to its highs could put on this bull put spread.

XLE Credit Spread Trade Details:

XLE is currently trading at $57.02.

Credit Spread/Bull Put Spread–

Sell the June 55 put for $2.53 per contract.
Buy the June 50 put for $1.01 per contract.
Net credit of $1.52

Profit/Loss Details:

Maximum profit: $1.52 (the credit collected).

Maximum risk: $3.48 (the difference between strikes minus the credit collected). Return on risk is about 43%.

Breakeven: $53.48 (the strike of the short put minus the premium).

DIAMONDS Trust (NYSE: DIA) Bull Call Spread

the ONN Idea Generating Platform — Mon, 01 Mar 2010 19:38:39 +0000

Dow 11,000 around the corner? Famed investor Marc Faber says US equity markets will rally into the summer before a larger correction resumes. If you think we are in store for a spring rally, this June bull call spread in the DIAMONDS Trust (NYSE: DIA) for 28 cents offers a potential 39% return on risk.

DIA Debit Spread Trade Detail

The DIA is currently trading at $104.10.

Debit Spread/Bull Call Spread -

Buy the June 110 call (out-of-the-money) for $1.10 per contract.
Sell the June 111 call (out-of-the-money) for $0.82 per contract.
Net debit of $0.28 (or $28 per spread)

Profit/Loss Details:

Maximum risk: $0.28 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $0.72 (the difference between strike prices -1 – minus the debit of $0.28). Return on risk is approximately 257%.

Breakeven: 110.28 (the strike price of the purchased call plus the debit paid).

Amgen (NASDAQ: AMGN) covered call

the ONN Idea Generating Platform — Mon, 01 Mar 2010 18:00:51 +0000

Biotech has been a steady performer this year, and while much of the bullish tone surrounds mergers and acquisitions (M&A) headline action like today’s talk about a suitor for small cap OSI Pharmaceuticals Inc. (NASDAQ: OSIP), investing in the big names is always part of a core strategy for this sector. We looked at an out-of-the-money April bull call spread for Amgen Inc. (NASDAQ: AMGN) last month and today we want to suggest a covered call play as another way to use options with the stock. AMGN appears stuck around $57 for the short-term, with its 50- and 200-day moving averages both hovering within 25 cents of this level. Selling the April 57.5 calls for at least $1.40 per contract offers a nice cushion for owning the stock while it marks time there, and even allows for a 3.5% return on risk in 46 days if the shares get called away.

AMGN Covered Call Trade Details:

AMGN is currently trading at $56.93, down roughly 0.6% today.

Covered Call –

Sell the April 57.5 call (out-of-the-money) for $1.40 per contract (or better).
Buy 100 shares of stock for every sold call (current price for 100 shares is $5,693).

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this covered call trade.

Profit/Loss Details:

Maximum potential profit:, if assigned, is $1.97 (the premium received plus the difference between the strike price and the stock purchase price). Return on risk is approximately 3.5% in 46 days.

Maximum risk: $55.53 (the stock price at the time of purchase minus the credit).

Breakeven: $55.53 (the stock price at the time of purchase minus the credit).

A covered call has essentially three possibilities:

The stock can stay flat, leaving the out-of-the-money call to expire worthless. The investor keeps the premium and gains nothing on the purchased shares.

The stock can decline, at which point the option again expires worthless and the investor keeps the premium but takes a loss on the stock. In scenarios one and two, the covered call outperforms the stock side of the trade.

If AMGN rises above the 57.5-strike between now and April expiration, the option will likely be exercised, capping the stock’s upside.

For more on AMGN:

Amgen (NASDAQ: AMGN) bull call spread

Sidewinder Update: Amgen (NASDAQ: AMGN)

American International Group (NYSE: AIG) iron butterfly

the ONN Idea Generating Platform — Mon, 01 Mar 2010 16:29:18 +0000

American International Group (NYSE: AIG) is rallying today after Prudential of England agreed to pay more than $35 billion for the Asian operations of the massive insurer. The reason the bulls like this AIG news is because for every asset that AIG gets to sell at a reasonable price in the market, the odds increase that the company will be able to pay back the government.

On February 11, Kevin Cook wrote an article about the bull case for AIG. And on February 18, Beth Gaston Moon pointed out some long-dated put selling that bets on declining implied volatility for AIG.

For investors who believe in a declining-volatility, bullish-case for AIG, here is a long delta iron butterfly. Iron Butterflies are four-legged trades, so it helps to have a brokerage account with some of the lowest rates in the industry…

Iron Butterfly Trade Details:

AIG is currently trading at $26.61, up about 7.5% today.

Below are the elements (one straddle, one strangle) for this iron butterfly. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Butterfly Part I: Short Straddle –

Sell the May 30 put
Sell the May 30 call
Net credit of $6.90 per spread

Iron Butterfly Part II: Long Strangle –

Buy the May 15 put
Buy the May 35 call
Net debit of $0.80 per spread

Overall credit for the spread: $6.10 or better

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $6.10 (the total premium collected). Minus commissions. Maximum profit occurs if AIG is trading at the 30 strike come May expiration.

Maximum risk: $8.90 (the difference between put strikes minus the premium collected). Plus commissions. Return on risk for this strategy is roughly 69%.

Upper breakeven price: $36.10 (the strike of the sold call plus the premium received).

Lower breakeven price: $23.90 (the strike of the sold put minus the premium).

Dell Inc. (NASDAQ: DELL) long call

the ONN Idea Generating Platform — Mon, 01 Mar 2010 15:07:34 +0000

Dell Inc. (NASDAQ: DELL) announced earnings on February 18. Since then, the stock has dropped from $14.43 to the mid-$13 level. For investors who think there could be an impending rally in the shares, consider going long the April 14 calls. The implied volatility is below 28, compared to a 21-day realized volatility of 35.

DELL Long Call Trade Details:

DELL is currently trading at $13.45, up about 1.5% today.

Long Call –

Buy the April 14 call for $0.32 or less
Net debit of $0.32 or better per contract

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: Maximum profit for a long call is theoretically unlimited if the underlying stock rallies above the breakeven price.

Maximum Risk: $0.32 (the amount paid for the contract).

Breakeven: $14.32 (the call strike plus the premium paid).

For more on DELL:

Call buyers prepare for Dell (NASDAQ: DELL) earnings

Las Vegas Sands Corp. (NYSE: LVS) bear call spread

the ONN Idea Generating Platform — Fri, 26 Feb 2010 19:57:01 +0000

Las Vegas Sands (NYSE: LVS) has been trading between $15 and $20 for six months, and after its reported earnings loss of 17 cents per share earlier this month, the stock gapped down from a recent swing high at $18. For investors who think the shares have limited upside for the next seven weeks, especially with the debt load casinos currently carry in their long-term foreign expansions, this April bear call spread offers the opportunity to earn a potential 56% return on risk. LVS is currently trading just below its 50-day moving average, and though strong support may exist at $15, even a rise to fill the gap up to $18 could make this strategy profitable.

LVS Credit Spread Trade Details:

LVS is currently trading at $16.55, up about 2.2% today.

Credit Spread/Bear Call Spread –

Sell the April 18 call
Buy the April 20 call
Net credit of $0.36 or better per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $0.36 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $1.64 (the difference between strikes minus the credit collected). Reward on risk is approximately 455% in 49 days.

Breakeven: $18.36 (the strike of the lower call plus the premium collected).

For more on LVS:

Put sellers bet on Las Vegas Sands (LVS)

Las Vegas Sands (LVS) pullback inspires the bulls

Visa Inc. (NYSE: V) iron condor

the ONN Idea Generating Platform — Fri, 26 Feb 2010 18:03:11 +0000

For investors who want to play a trading range in Visa Inc. (NYSE: V), this short iron condor offers a potential 36% return on risk to June options expiration. And with V shares in the third month of what could be a longer consolidation between $80 and $90, the strategy allows for the stock to trade in a $20 range and still realize profits.

Iron Butterfly Trade Details:

V is currently trading at $85.16, virtually unchanged today.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the June 75 put
Buy the June 70 put
Net credit of $0.64 per spread

Iron Condor Part II: Bear Call Spread –

Sell the June 95 call
Buy the June 100 call
Net credit of $0.72 per spread

Overall credit for the four-legged spread: $1.36

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $1.36 (the total premium collected) minus commissions.

Maximum risk: $3.64 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 36% for this strategy.

Upper breakeven price: $96.36 (the strike of the sold call plus the total premium).

Lower breakeven price: $73.64 (the strike of the sold put minus the total premium).

More on V:

Visa Inc. (NYSE: V) bull put spread

Option strategies following Visa earnings report

Deere & Company (NYSE: DE) cash-secured put

the ONN Idea Generating Platform — Fri, 26 Feb 2010 16:30:56 +0000

Want to buy Deere & Company (NYSE:DE) for a 5% discount today? Try selling a cash-secured put. Earlier this morning, DE was trading down 60 cents this morning below $56.40. Though the stock has swung into the black, we still feel this trade makes sense for investors who would not mind owning DE shares.

If you sell this put, you will give yourself the opportunity to buy the stock at a net effective cost of $54.12, 5.3% below its current price. If the stock stays above the 55 strike through March options expiration in 21 days, you will not be assigned on the short put and be forced to buy the shares. But you will still keep the $0.88 premium you collected.

DE Cash-Secured Put Trade Details:

DE is trading at $57.15, up roughly 0.33% today.

Cash Secured Short Put –

Sell the March 55 put for $0.88 or more
Net credit of $0.88
For every contract, set aside $5,412 in cash: [(55 - 0.88) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, should the stock drop and the put gets assigned, you can purchase DE at an effective price of $54.12, or 5.3% below its current price.

A free virtual trading account with OptionsHouse allows you to build profit/loss diagrams to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum potential profit: $0.88 per contract (the premium collected) minus commissions. (This profit is for the short put option only and may change if the investor opts to buy the stock at $54.12).

Maximum risk: $54.12 (the strike price minus the premium collected). Return on risk for this trade is 1.6% in 21 days.

Breakeven: $54.12 (the strike price minus the premium collected).

For more on DE:

Select Sector SPDR Financial ETF (NYSE: XLF) bear call spread

the ONN Idea Generating Platform — Fri, 26 Feb 2010 15:24:24 +0000

If you believe that the global banking system still faces underlying structural problems, one conservative way to play the theme is by selling call spreads on the basket of financial companies. This bear call spread on the Select Sector SPDR Financial ETF (NYSE: XLF) can return a potential 47% to June and its breakeven level at $15.32 is just below the last swing highs of early January.

If the XLF price action if still in the middle of a sideways descending channel, then the ETF may meet resistance above $15, especially as the 20- and 50-day moving averages have crossed bearish this month below $14.50.

XLF Credit Spread Trade Details:

The XLF is currently trading at $14.57, down about 0.15% today.

Credit Spread/Bear Call Spread –

Sell the June 15 call
Buy the June 16 call
Net credit of $0.32 or better per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $0.32 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $0.68 (the difference between strikes minus the credit collected). Reward on risk is approximately 47% in 112 days.

Breakeven: $15.32 (the strike of the lower call plus the premium collected).

Coca-Cola (NYSE: KO) covered call

the ONN Idea Generating Platform — Thu, 25 Feb 2010 19:36:31 +0000

The Coca-Cola Company (NYSE: KO) shares are selling off today following the beverage giant’s announcement that they are acquiring Coca-Cola Enterprises Inc. (NYSE: CCE). In fact, KO is falling more than the broader market as the market may be thinking KO is paying too much for the deal.

For those investors who still like Coca-Cola and want to buy it on a pullback, here is a covered call strategy. In addition to the proceeds you get from selling the call, you will participate in any stock dividends.

KO Covered Call Trade Details:

KO is currently trading at $53.02, down roughly 3.9% today.

Covered Call –

Sell the May 55 call (out-of-the-money) for $0.90 per contract (or better).
Buy 100 shares of stock for every sold call (current price for 100 shares is $5,302).

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum potential profit:, if assigned, is $2.88 (the premium received plus the difference between the strike price and the stock purchase price). Return on risk is approximately 5.5% in 85 days.

Maximum risk: $52.12 (the stock price at the time of purchase minus the credit).

Breakeven: $52.12 (the stock price at the time of purchase minus the credit).

A covered call has essentially three possibilities:

The stock can stay flat, leaving the out-of-the-money call to expire worthless. The investor keeps the premium and gains nothing on the purchased shares.
The stock can decline, at which point the option again expires worthless and the investor keeps the premium but takes a loss on the stock. In scenarios one and two, the covered call outperforms the stock side of the trade.
If KO rises above the 55 strike between now and May expiration (a 3.8% advance), the option will likely be exercised, capping the stock’s upside.

For more on KO:

Coca-Cola Down on Deal With Bottlers Coca-Cola Enterprises

Options Strategies in Coca-Cola Company (KO)

Sohu.Com Inc. (NASDAQ: SOHU) bull call spread

the ONN Idea Generating Platform — Thu, 25 Feb 2010 18:45:16 +0000

Sohu.Com Inc. (NASDAQ: SOHU) is an Internet media company providing millions of Chinese consumers with daily information, communication, and entertainment. SOHU rallied more than 20% in December and January on news of Google’s troubles in China and the name is trading on a 12 P/E trailing multiple. For investors who like the business, and who think the stock may be finding support above $45, this June bull call spread offers an attractive risk/reward profile for a rise back to $60.

SOHU Debit Spread Trade Detail

SOHU is currently trading at $48.33, down about 1.8% today.

Debit Spread/Bull Call Spread:

Buy the June 55 call
Sell the June 60 call
Net debit of $1.15 or less

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum risk: $1.15 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $3.85 (the difference between strike prices – 5.00 – minus the debit of $1.15). Return on risk is approximately 335% in 113 days.

Breakeven: $56.15 (the strike price of the purchased call plus the debit paid).

For more on SOHU:

Earnings Reports Boost Volume in NEM, GILD, SOHU

Goldman Sachs Group (NYSE: GS) bull call spread

the ONN Idea Generating Platform — Thu, 25 Feb 2010 16:51:15 +0000

Goldman Sachs Group, Inc. (NYSE: GS) has been regarded as the go-to, best-in-breed financial firm for the past eight-nine months. In recent trading, the $150.00 level has been strong support for GS, with the stock closing below that level only once in the past six months on January 29th.

With this technical support in play, some traders may want to examine this in-the-money vertical bull call spread, which behaves like an out-of-the-money put spread.

GS Debit Spread Trade Detail

GS is currently trading at $155.45, down about 1.8% today.

Debit Spread/Bull Call Spread

Buy the March 145 call
Sell the March 150 call
Net debit of $3.85 or less

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum risk: $3.85 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $1.15 (the difference between strike prices – 5.00 – minus the debit of $3.85). Return on risk is approximately 30% in 22 days.

Breakeven: $148.85 (the strike price of the purchased call plus the debit paid).

For more on GS:

Goldman Sachs Group, Inc. (NYSE: GS) bear call spread

Bull and bear outcomes on Goldman Sachs (NYSE: GS)

Goldman Sachs (NYSE: GS) iron condor

S&P 500 Index (SPX) bull put spread

the ONN Idea Generating Platform — Thu, 25 Feb 2010 15:22:25 +0000

We are taking advantage of today’s selloff – and the increase in the CBOE SPX Volatility Index (VIX) – as a means to get long some delta and sell a little volatility with a bull put spread on the S&P 500 Index (SPX).

SPX Credit Spread Trade Details:

The SPX is currently trading at $1089.66, down 1.4% today.

Credit Spread/Bull Put Spread–

Sell the March 1,000 put
Buy the March 980 put
Net credit of $0.95 (or better) for the spread

To visualize the risk/reward profile of this trade and others, build a profit/loss chart with a free virtual trading account at OptionsHouse.

Profit/Loss Details:

Maximum profit: $0.95 (the credit collected).

Maximum risk: $19.05 (the difference between strikes minus the credit collected). Return on risk is approximately 5% in 22 days.

Breakeven: $999.05 (the strike of the short put minus the premium).

Whole Foods Market (WFMI) Bear Call Spread

the ONN Idea Generating Platform — Wed, 24 Feb 2010 19:30:23 +0000

Whole Foods Market Inc. (WFMI) reported earnings after the market closed on Feb. 16. For investors who think the stock is unlikely to rally more until the next earnings announcement sometime in May, here is a bear call spread.

WFMI Credit Spread Trade Details:

WFMI is currently trading around $34.42.

Credit Spread/Bear Call Spread–

Sell the April 35 call (out-of-the-money) for $1.25 per contract.
Buy the April 36 call (out-of-the-money) for 87 cents per contract.
Net credit of 38 cents per spread

Profit/Loss Details:

Maximum Profit: 38 cents (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: 62 cents (the difference between strikes minus the credit collected).

Breakeven: $35.38 (the strike of the lower call plus the premium).

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

FedEx Corporation (NYSE: FDX) iron butterfly

the ONN Idea Generating Platform — Wed, 24 Feb 2010 18:00:45 +0000

FedEx Corporation (NYSE: FDX) is up more than 2% today without any major news, benefiting from the modest rally in the broader market. After reaching an intraday 52-week high of $92.59 back in December, FDX has pulled back over the past couple of months.

Earnings are due to come out March 18 before the open. For investors who think the stock could rally a little but be capped again at the 90 strike, here is a short iron butterfly that stands to make the most money if the stock goes right to 90 and sits there until April expiration.

Iron Butterfly Trade Details:

FDX is currently trading at $83.37, up about 2.3% today.

Below are the elements (one straddle, one strangle) for this iron butterfly. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Butterfly Part I: Short Straddle –

Sell the April 90 put
Sell the April 90 call
Net credit of $9.10 per spread

Iron Butterfly Part II: Long Strangle –

Buy the April 70 put
Buy the April 100 call
Net debit of $0.40 per spread

Overall credit for the spread: $8.70

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $8.70 (the total premium collected). Minus commissions. Maximum profit occurs if FDX is trading at the 90 strike come April expiration.

Maximum risk: $11.30 (the difference between call or put strikes minus the premium collected). Return on risk for this strategy is roughly 77%.

Upper breakeven price: $98.70 (the strike of the sold call plus the premium received).

Lower breakeven price: $81.30 (the strike of the sold put minus the premium).

For more on FDX:

FedEx declares regular dividend of 11 cents

FedEx Corporation (NYSE: FDX) bear call spread

PACCAR Inc. (NASDAQ: PCAR) bull put spread

the ONN Idea Generating Platform — Wed, 24 Feb 2010 16:30:25 +0000

In the past few months, PACCAR Inc. (NASDAQ: PCAR) has pulled back from its 52-week high of $40.26, and has bounced around the $35 level. For bullish-to-neutral investors who think that the shares will be above the $35 level at May expiration, here is a bull put spread.

PCAR Credit Spread Trade Details:

PCAR is currently trading at $35.49.

Credit Spread/Bull Put Spread–

Sell the May 35 put
Buy the May 30 put
Net credit of $1.20 (or better) for the spread

To visualize the risk/reward profile of this trade (or any other), build a profit/loss chart with a free virtual trading account at OptionsHouse.

Profit/Loss Details:

Maximum profit: $1.20 (the credit collected).

Maximum risk: $3.80 (the difference between strikes minus the credit collected). Return on risk is approximately 32%.

Breakeven: $33.80 (the strike of the short put minus the premium).

For more on PCAR:

PACCAR Inc. (PCAR) iron condor

Paccar says 4Q profit fell 59 pct to $46.1M

PCAR: Winning and Losing Plays on Paccar

Citigroup Inc. (NYSE: C) iron condor

the ONN Idea Generating Platform — Wed, 24 Feb 2010 15:00:01 +0000

Because Citigroup Inc. (NYSE: C) shares trade for a price below $4, it is oftentimes hard to find trades that seem like they make a lot of money. But it is important to remember that investment is about percentage returns. So when you have a low-priced stock, investors simply need to trade more contracts or more shares to gain the exposure.

For example, the capital at risk for 1,000 shares of C for $3.35 is no different than 100 shares of some other stock trading for $33.50 (or 10 shares of a $335 stock). With that in mind, if you are trading a low-dollar stock like C, it is important to keep your transactions costs low. Using a firm that has $2.95 flat commission stock trades for any amount of shares is one way to do that.

On the options front, the translation is to trade more contracts. For investors who think that shares of C have found a range between $3 and $4 and are unlikely to break out of that, here is a short iron condor to put some capital to work.

Iron Condor Trade Details:

C is currently trading at $3.35.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the June 3 put
Buy the June 2 put
Net credit of $0.13 per spread

Iron Condor Part II: Bear Call Spread –

Sell the June 4 call
Buy the June 5 call
Net credit of $0.07 per spread

Overall credit for the four-legged spread: $0.20

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.20 (the total premium collected) minus commissions.

Maximum risk: $0.80 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 20% for this strategy.

Upper breakeven price: $4.20 (the strike of the sold call plus the total premium).

Lower breakeven price: $2.80 (the strike of the sold put minus the total premium).

More on C:

InterMune, Inc. (NYSE: ITMN) long time spread

the ONN Idea Generating Platform — Tue, 23 Feb 2010 20:20:47 +0000

InterMune, Inc. (NASDAQ: ITMN) is developing a lung drug that is set to be evaluated by the Food and Drug Administration’s advisory panel at a meeting in March. The market expects this to be a high-volatility event that could drive the shares either way. For investors who do not think that ITMN will move as much as the market projects, consider this long calendar spread.

ITMN Credit Spread Trade Details:

ITMN is currently trading at $15.00, up roughly 0.7% today.

Time Spread/Calendar Spread–

Sell the March 15 call
Buy the July 15 call
Net debit of $1.50 (or better) for the spread

By opening a free virtual trading account at OptionsHouse, you’ll gain access to streaming charts, volatility charts, a probability calculator, and other professional-grade tools.

Profit/Loss Details:

Maximum profit: Profit is theoretically unlimited above the 15 strike. If the stock stays relatively unchanged between now and March options expiration, the sold call will expire worthless, allowing the investor to retain the premium collected for that sale. That leaves the investor with a long July 15 strike call, which theoretically advances as the stock moves higher.

Maximum risk: $1.55 (the overall debit paid). This is only the maximum risk, however, up until when the March option expires. Ideally, for a long calendar spread, the short-term option expires worthless and the underlying then rallies, increasing the value of the long, longer-dated call.

One scenario investors need to be prepared for is a move in ITMN above the strike price before expiration of the front month, resulting in assignment on the short call. In this case, you would be short 100 shares of stock at $15 which is offset by the long 15-strike call, which you can exercise at any time and close both positions. Depending on your broker’s guidelines, you may be able to trade out of this position by selling your call and buying back the shares.

Breakeven: $16.50 (the strike of the short call plus the premium paid).

For more on ITMN:

Investors load up on OTM InterMune (NASDAQ: ITMN) calls

InterMune, Inc. (NASDAQ: ITMN) bull call spread

Toyota Motor (NYSE: TM) bull put spread

the ONN Idea Generating Platform — Tue, 23 Feb 2010 18:00:08 +0000

Looking to pick a bottom in Toyota Motor (NYSE:TM)? Selling put spreads might be a way to generate income from bullish ideas about the beleaguered auto maker. When the dust settles on the company’s troubles, the fact remains that they are one of the preeminent vehicle brands and this crisis won’t kill their business. This April 65/70 bull put spread collects at least $1.50 and has the potential to return 43% on risk if the stock stays above $70 through April expiration.

TM Credit Spread Trade Details:

TM is currently trading at $72.05, down roughly 1.2% today.

Credit Spread/Bull Put Spread–

Sell the April 70 put
Buy the April 65 put
Net credit of $1.50 (or better) for the spread

To visualize the risk/reward profile of this trade (or any other), build a profit/loss chart with a free virtual trading account at OptionsHouse.

Profit/Loss Details:

Maximum profit: $1.50 (the credit collected).

Maximum risk: $3.50 (the difference between strikes minus the credit collected). Return on risk is approximately 43% in 52 days.

Breakeven: $68.50 (the strike of the short put minus the premium).

For more on TM:

Put buying in Toyota (NYSE: TM), Steel Dynamics (NASDAQ: STLD)

APNewsBreak: Govt demands Toyota recall documents

Ford Motor (F) passes Toyota (TM)

SPDR Gold Trust (NYSE: GLD) ETF bull put spread

the ONN Idea Generating Platform — Tue, 23 Feb 2010 16:46:39 +0000

Barron’s reported this weekend that legendary hedge fund manager John Paulson has his biggest holding in the SPDR Gold Trust (NYSE: GLD) ETF. For investors who are bulled up like Paulson, here is a bull put spread.

GLD Credit Spread Trade Details:

The GLD is currently trading at $108.38, down roughly 0.7% today.

Credit Spread/Bull Put Spread–

Sell the April 105 put
Buy the April 104 put
Net credit of $0.30 (or better) for the spread

To visualize the risk/reward profile of this strategy (or any other), build a profit/loss chart with a free virtual trading account at OptionsHouse.

Profit/Loss Details:

Maximum profit: $0.30 (the credit collected). While this may not seem like a lot, return on risk is nearly 50% for this strategy.

Maximum risk: $0.70 (the difference between strikes minus the credit collected). Return on risk is approximately 43% in 52 days.

Breakeven: $104.70 (the strike of the short put minus the premium).

For more on GLD:

Commodities End Mixed On Economic Concerns

CNBC – The Gold Standard

Rambus Inc. (NASDAQ: RMBS) iron condor

the ONN Idea Generating Platform — Tue, 23 Feb 2010 15:32:34 +0000

During the past two-and-a-half months, Rambus Inc. (NASDQ: RMBS) has been range-bound between 20 and 25. The company has been involved in various legal battles for years, but recently, implied volatility has declined precipitously as many of the legal battles are gaining more clarity. For people who think RMBS will stay in a range, here is a short iron condor.

Iron Condor Trade Details:

RMBS is currently trading at $21.49, down roughly 3.1% on the day.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the May 17 put
Buy the May 15 put
Net credit of $0.27 per spread

Iron Condor Part II: Bear Call Spread –

Sell the May 26 call
Buy the May 28 call
Net credit of $0.25 per spread

Overall credit for the four-legged spread: $0.52

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.52 (the total premium collected) minus commissions.

Maximum risk: $1.48 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 35% for this strategy.

Upper breakeven price: $26.52 (the strike of the sold call plus the total premium).

Lower breakeven price: $16.48 (the strike of the sold put minus the total premium).

More on RMBS:

Selling Rambus (NASDAQ: RMBS) upside

Rambus Inc. (NASDAQ: RMBS) cash-secured put

Rambus shares drop on larger 4Q loss

Monsanto Company (NYSE: MON) bull put spread

the ONN Idea Generating Platform — Mon, 22 Feb 2010 19:34:04 +0000

Monsanto Company (NYSE: MON) is emerging from a rounding-bottom formation and may be well on its way to recovery. If you believe in the stock, and in the near-term future for agriculture companies, you may consider this bull put spread, which comes with a maximum potential loss of $3.60 per spread and offers a return on risk of almost 40%.

MON Credit Spread Trade Details:

MON is currently trading at $76.84, down roughly 1.2% today.

Credit Spread/Bull Put Spread–

Sell the April 75 put
Buy the April 70 put
Net credit of $1.40 (or better) for the spread

To visualize the risk/reward profile of this strategy (or any other), build a profit/loss chart with a free virtual trading account at OptionsHouse.

Profit/Loss Details:

Maximum profit: $1.40 (the credit collected).

Maximum risk: $3.60 (the difference between strikes minus the credit collected). Return on risk is approximately 39% in 53 days.

Breakeven: $73.60 (the strike of the short put minus the premium).

For more on MON:

Seed maker Monsanto maintains 2010 profit outlook

Monsanto Co. (MON) Iron Condor

Potash Corp. Saskatchewan (NYSE: POT) cash-secured put

the ONN Idea Generating Platform — Mon, 22 Feb 2010 18:18:49 +0000

Would you like to buy Potash (NYSE: POT) for just $107 while it’s trading above $113.50? This $6.50 discount can be achieved by a cash-secured put strategy. To sell the March 110 put “naked,” your broker will require you to have the necessary funds in your account to buy the stock at $110. Minus the credit of $3 you receive for selling the put, this will make your effective cost for the shares $107 if assigned.

Just be sure that this is a name you have fundamental conviction about and want to own at the $107 level so that you are comfortable with all of the investment risks involved.

POT Cash-Secured Put Trade Details:

POT is trading at $113.83, down roughly 1.1% today.

Cash Secured Short Put –

Sell the March 110 put for $3.00 or more
Net credit of $3.00
For every contract, set aside $10,700 in cash: [(110 - 3.00) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, should the stock drop and the put gets assigned, you can purchase POT at an effective price of $107.00, or 6% below its current price.

A free virtual trading account with OptionsHouse allows you to build profit/loss diagrams to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum potential profit: $3.00 per contract (the premium collected) minus commissions. (This profit is for the short put option only and may change if the investor opts to buy the stock at $107.00).

Maximum risk: $107.00 (the strike price minus the premium collected). Return on risk for this trade is 2.8% in 25 days.

Breakeven: $107.00 (the strike price minus the premium collected).

For more on POT:

Potash (NYSE: POT) On Fertile Ground Above $100

Potash Corp. Saskatchewan (NYSE: POT) bull put spread

Stories for POTASH CORP OF SASKATCHEWAN

Potash (NYSE: POT) On Fertile Ground Above $100 -

JPMorgan Chase & Co. (NYSE: JPM) iron condor

the ONN Idea Generating Platform — Mon, 22 Feb 2010 16:41:07 +0000

Think JPMorgan Chase (NYSE: JPM) will stay in a $12 range around $40 through June options expiration? This short iron condor can collect $0.96 and return a potential 32% on risk if that thesis holds.

Iron Condor Trade Details:

JPM is currently trading at $40.59, up roughly 1.4% on the day.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the June 34 put
Buy the June 30 put
Net credit of $0.42 per spread

Iron Condor Part II: Bear Call Spread –

Sell the June 46 call
Buy the June 50 call
Net credit of $0.54 per spread

Overall credit for the four-legged spread: $0.96

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.96 (the total premium collected) minus commissions.

Maximum risk: $3.04 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 32% for this strategy.

Upper breakeven price: $46.96 (the strike of the sold call plus the total premium).

Lower breakeven price: $33.04 (the strike of the sold put minus the total premium).

More on JPM:

J.P. Morgan (NYSE: JPM) call one-by-two

A bull run on JPMorgan Chase (NYSE: JPM)

Cree, Inc. (NASDAQ: CREE) bear call spread

the ONN Idea Generating Platform — Mon, 22 Feb 2010 15:16:13 +0000

Cree, Inc. (NASDAQ: CREE) has been in a parabolic run from $18 to $67 since March of 2009, reaching levels not seen since the dot-com meltdown of 2000. The advanced semiconductor manufacturer sports a trailing price-to-earnings (P/E) multiple of over 90 and may be due for a pause before it continues its upward trajectory. This short bear call spread can achieve a 37% return on risk if the stock stays below $70 through April options expiration.

CREE Credit Spread Trade Details:

CREE is currently trading at $66.56, up about 0.5% today.

Credit Spread/Bear Call Spread –

Sell the April 70 call
Buy the April 75 call
Net credit of $1.35 or better per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $1.35 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $3.65 (the difference between strikes minus the credit collected). Reward on risk is approximately 37% in 53 days.

Breakeven: $71.35 (the strike of the lower call plus the premium collected).

For more on the CREE:

MidnightTrader’s After-Hours Watch List Scorecard: RMBS, IBM, CREE, SIRI

Investors mixed post-earnings in Cree, Bank of America

Apple Inc. (NASDAQ: AAPL) cash-secured put

the ONN Idea Generating Platform — Fri, 19 Feb 2010 19:41:37 +0000

After a brief setback in late January, Apple (NASDAQ: AAPL) has steadily been resuming its uptrend and is currently trading back above the 200 mark. Investors who believe the shares are not likely to fall as much as 6% in the next month could consider this cash-secured put as a neutral options strategy.

AAPL Cash-Secured Put Trade Details:

AAPL is trading at $202.15, down roughly 0.4% today.

Cash Secured Short Put –

Sell the March 190 put for $2.15 or more
Net credit of $2.15
For every contract, set aside $18,785 in cash: [(190 - 2.15) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, should the stock drop and the put gets assigned, you can purchase AAPL at an effective price of $187.85, or 7.1% below its current price.

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum potential profit: $2.15 per contract (the premium collected) minus commissions. (This profit is for the short put only and may change if the investor opts to buy the stock at $187.85).

Maximum risk: $187.85 (the strike price minus the premium collected). Return on risk for this trade is 1.5% in 28 days.

Breakeven: $187.85 (the strike price minus the premium collected).

For more on AAPL:

Trading an Apple Inc. (NASDAQ: AAPL) bull put spread

Apple (NASDAQ: AAPL) volatility drops after iPad announcement

iShares Russell 2000 Index (IWM) iron condor

the ONN Idea Generating Platform — Fri, 19 Feb 2010 18:03:12 +0000

Stocks are holding up well on the “beginning of the end” of quantitative easing this morning. That bodes well for an investment thesis that continues to see stocks in a narrow trading range. This iron condor on the iShares Russell 2000 Index (NYSE:IWM)can realize profits if the index rallies or falls 9.5% from current levels to May expiration.

Iron Condor Trade Details:

The IWM is currently trading at $63.27, up roughly 0.5% on the day.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

Sell the May 57 put
Buy the May 56 put
Net credit of $0.16 per spread

Iron Condor Part II: Bear Call Spread –

Sell the May 69 call
Buy the May 70 call
Net credit of $0.16 per spread

Overall credit for the four-legged spread: $0.32

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.32 (the total premium collected) minus commissions.

Maximum risk: $0.68 (the difference between call or put strikes minus the premium collected). Return on risk is approximately 47% for this strategy.

Upper breakeven price: $69.32 (the strike of the sold call plus the total premium).

Lower breakeven price: $56.68 (the strike of the sold put minus the total premium).

More on the IWM:

Earnings Preview: Las Vegas Sands Corp.

Las Vegas Sands declares dividend on some shares

Retail HOLDRs ETF (NYSE: RTH) bear call spread

the ONN Idea Generating Platform — Fri, 19 Feb 2010 16:28:17 +0000

Think we’ve seen the top in retail stocks for the next two months? Then this April bear call spread on the Retail HOLDRs ETF (NYSE: RTH) offers a nice risk/reward opportunity. Selling the spread for $1.40 could return as much as 39% in 56 days versus the maximum risk of $3.60. The 52-week high in the RTH is $96.25 and the ETF has recently recovered its 50-day moving average just above $93, but sideways trading between $90 and $95 could persist in the short-term as the broad market continues to consolidate.

RTH Credit Spread Trade Details:

The RTH is currently trading at $94.08, up about 0.15% today.

Credit Spread/Bear Call Spread –

Sell the April 95 call
Buy the April 100 call
Net credit of $1.40 or better per spread

A free virtual trading account from OptionsHouse offers, among other tools, a probability calculator that helps project the likelihood of success for this trade.

Profit/Loss Details:

Maximum Profit: $1.40 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $3.60 (the difference between strikes minus the credit collected). Reward on risk is approximately 17% in 29 days.

Breakeven: $96.40 (the strike of the lower call plus the premium collected).

For more on the RTH:

Trading the Retail Sector on Cyber Monday

Amgen, Inc. (NASDAQ: AMGN) bull call spread

the ONN Idea Generating Platform — Fri, 19 Feb 2010 15:46:31 +0000

Amgen (NASDAQ: AMGN) has been making higher lows on the chart since November, underperforming the S&P 500 by 40% in the past year, but slowly regaining its footing during the past three months.

The stock also survived a recent earnings report that disappointed analysts in late January. With a price-to-earnings (P/E) multiple of only 12, this giant among biotech companies could be poised for another run at its 52-week highs above $64 and this $2.50 wide bull call spread for only 57 cents might be a good way to play it.

AMGN Debit Spread Trade Detail

AMGN is currently trading at $57.30, up about 0.05% today.

Debit Spread/Bull Call Spread

Buy the April 60 call
Sell the April 62.50 call
Net debit of $0.57 or less

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum risk: $0.57 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $1.93 (the difference between strike prices – 2.50 – minus the debit of $0.57). Return on risk is approximately 295% in 56 days.

Breakeven: $60.57 (the strike price of the purchased call plus the debit paid).

For more on AMGN:

Sidewinder Update: Amgen (NASDAQ: AMGN)

Put buying dominates Amgen (NASDAQ: AMGN) option volume

Exxon Mobil Corporation (NYSE: XOM) bull put spread

the ONN Idea Generating Platform — Thu, 18 Feb 2010 19:30:34 +0000

Bullish on oil? Exxon Mobil Corporation (NYSE: XOM) can not only be a proxy for oil, but also is the giant in the industry. Investors who have a bullish stance on oil but don’t want to invest in a swap-driven ETF such as the United Stated Oil Fund (NYSE: USO) could consider XOM.

For a moderately bullish trade, the Idea Generating Platform (IGP) has located an out-of-the-money bull put spread in March.

XOM Credit Spread Trade Details:

XOM is currently trading at $65.77, virtually unchanged today.

Credit Spread/Bull Put Spread–

Sell the March 65 put
Buy the March 60 put
Net credit of $0.85 (or better) for the spread

To check out the profit/loss profile of this trade (or any other), open a free virtual trading account with OptionsHouse.

Profit/Loss Details:

Maximum profit: $0.85 (the credit collected).

Maximum risk: $4.15 (the difference between strikes minus the credit collected). Return on risk is approximately 20% in 29 days.

Breakeven: $64.15 (the strike of the short put minus the premium).

For more on XOM:

Sector Update: Energy Lower as Oil Inventories Rise

Sidewinder Update: Exxon Mobil (NYSE: XOM)

Google Inc. (NASDAQ: GOOG) bull put spread

the ONN Idea Generating Platform — Thu, 18 Feb 2010 18:04:01 +0000

Google (NASDAQ: GOOG) has been holding its ground through the recent downturns in the market. It is also off sharply from its recent high, however, which lowers its price-to-earnings (P/E) multiple and may also attract investors.

In the past several weeks, GOOG did not drop below 520.00; this bull put spread places the breakeven more than 20 points below that.

GOOG Credit Spread Trade Details:

GOOG is currently trading at $539.81, up approximately 0.3% today.

Credit Spread/Bull Put Spread–

Sell the March 500 put
Buy the March 490 put
Net credit of $0.90 (or better) for the spread

To check out the profit/loss diagram of this trade (or any other), open a free virtual trading account with OptionsHouse.

Profit/Loss Details:

Maximum profit: $0.90 (the credit collected).

Maximum risk: $9.10 (the difference between strikes minus the credit collected). Return on risk is approximately 9.9% in 29 days.

Breakeven: $499.10 (the strike of the short put minus the premium).

For more on GOOG:

Judge says no quick ruling on Google book plans

Trading out of a Google (NASDAQ: GOOG) bull put spread

GOOG March iron butterfly

Yahoo! Inc. (YHOO) bear call spread

the ONN Idea Generating Platform — Thu, 18 Feb 2010 16:41:08 +0000

Looking to take a bearish view in Yahoo! Inc. (NASDAQ: YHOO)? YHOO founders David Filo and Jerry Yang have both filed to sell roughly five million shares of YHOO stock. While this certainly doesn’t mean the end for YHOO, some may interpret this as bearish for the company. Investors who agree with this thesis might employ a bear call spread as a less risky approach to shorting the stock outright.

YHOO Credit Spread Trade Details:

YHOO is currently trading at $15.58, up about 0.9% today.

Credit Spread/Bear Call Spread –

Sell the March 16 call
Buy the March 17 call
Net credit of $0.15 or better per spread

A free virtual trading account from OptionsHouse offers, among other tools, a probability calculator that helps project the likelihood of success for this trade.

Profit/Loss Details:

Maximum Profit: $0.15 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $0.85 (the difference between strikes minus the credit collected). Reward on risk is approximately 17% in 29 days.

Breakeven: $16.15 (the strike of the lower call plus the premium collected).

For more on YHOO:

Yahoo, Microsoft to begin their Web ad partnership

Option strategies in Yahoo! (NASDAQ: YHOO)

Yahoo! (YHOO) Sees Longer-Term Put Selling

MasterCard Incorporated (MA) bull put spread

the ONN Idea Generating Platform — Thu, 18 Feb 2010 15:14:06 +0000

MasterCard Incorporated (NYSE: MA) fell sharply on February 4th and has been forming a new range at these lower levels. The stock is also close to its recent low and support near the 218 mark. Investors who believe MA will maintain this support level may wish to examine this short bull put spread.

MA Credit Spread Trade Details:

MA is currently trading at $223.32, down approximately 0.7% today.

Credit Spread/Bull Put Spread–

–Sell the March 210 put
–Buy the March 200 put
–Net credit of $1.30 (or better) for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $1.30 (the credit collected).

Maximum risk: $8.70 (the difference between strikes minus the credit collected). Return on risk is approximately 15% in 29 days.

Breakeven: $208.70 (the strike of the short put minus the premium).

For more on MA:

Sector Update: Financials Lower, Concerns Over AIG Keeping Derivatives

Put selling in MasterCard (NYSE: MA) post-earnings

Dell Inc. (NASDAQ: DELL) long call

the ONN Idea Generating Platform — Wed, 17 Feb 2010 19:30:23 +0000

Dell Inc. (NASDAQ: DELL) is reporting earnings tomorrow after the close. The stock is currently trading for 11 times analysts’ annual earnings estimate. For investors who think DELL shares could move higher in the wake of their quarterly report, here is a long call idea.

DELL Long Call Trade Details:

DELL is currently trading at $14.09, down approximately 0.4% today.

Long Call –

–Buy the January 2011 10-strike calls for $4.70 or less
–Net debit of $4.70

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: Unlimited to the upside, assuming DELL is trading above the 10 strike

Maximum risk: $4.70 (the premium paid) .

Breakeven: $14.70 (the strike of the short put plus the premium paid). Above this level, the long call begins to earn money.

For more on DELL:

Tablets, smartbooks aim to fill PC-phone gap

Call buyers prepare for Dell (NASDAQ: DELL) earnings

Energy Select Sector SPDR (NYSE: XLE) Bull Put Spread

the ONN Idea Generating Platform — Wed, 17 Feb 2010 18:30:32 +0000

Even with yesterday’s rally, the Energy Select Sector SPDR (NYSE: XLE) is still below its January highs of over $60 per share. Here is a bull put spread for investors who think this ETF will hold the line.

XLE Credit Spread Trade Details:

XLE is currently trading at $56.64.

Credit Spread/Bull Put Spread–

Sell the June 56 put for $3.30 per contract.
Buy the June 46 put for $0.80 per contract.
Net credit of $2.50

Profit and loss details for this trade are provided below. For professional-level tools to help you analyze this trade further, visit OptionsHouse to open a free virtual trading account.

Profit/Loss Details:

Maximum profit: $2.50 (the credit collected).

Maximum risk: $7.50 (the difference between strikes minus the credit collected). Return on risk is about 33%.

Breakeven: $53.50 (the strike of the short put minus the premium).

Visa Inc. (NYSE: V) bull put spread

the ONN Idea Generating Platform — Wed, 17 Feb 2010 16:36:12 +0000

With Visa Inc. (NYSE: V) earnings out of the way, the time seems appropriate for another neutral-to-slightly-bullish strategy. The ONN Idea Generating Platform selected this bull put spread.

V Credit Spread Trade Details:

V is currently trading at $86.03, up approximately 0.17% today.

Credit Spread/Bull Put Spread–

–Sell the March 85 put
–Buy the March 80 put
–Net credit of $1.25 (or better) for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $1.25 (the credit collected).

Maximum risk: $3.75 (the difference between strikes minus the credit collected). Return on risk is approximately 33% in 30 days.

Breakeven: $83.75 (the strike of the short put minus the premium).

For more on V:

Option strategies following Visa earnings report

Discover pays $775M to settle with Morgan Stanley

Las Vegas Sands Corp. (NYSE: LVS) iron condor

the ONN Idea Generating Platform — Wed, 17 Feb 2010 15:26:49 +0000

Casino operator Las Vegas Sands (NYSE: LVS) is reporting earnings after the close tonight. For the past three months, the stock has been mired in a trading range, hovering between 15 and 18.50 since early November.

If you expect earnings will be a non-event (without a dramatic move from LVS shares after the fact), you may consider selling a short iron condor. This example uses March-series options (expiring in 30 days), but more aggressive investors could consider the June options as an alternative.

Iron Condor Trade Details:

LVS is currently trading at $17.73, up roughly 1% on the day.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. If possible, use a limit order to place this trade, specifying one price for the four-legged strategy.

Iron Condor Part I: Bull Put Spread –

–Sell the March 17.5 put
–Buy the March 10 put
–Net credit of $1.08 per spread

Iron Condor Part II: Bear Call Spread –

–Sell the March 19 call
–Buy the March 22.5 call
–Net credit of $0.60 per spread

–Overall credit for the four-legged spread: $1.68

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $1.68 (the total premium collected) minus commissions.

Maximum risk: $5.82 (the difference between put strikes minus the premium collected). Return on risk is approximately 29% for this strategy.

Upper breakeven price: $20.68 (the strike of the sold call plus the total premium).

Lower breakeven price: $15.82 (the strike of the sold put minus the total premium).

More on LVS:

Earnings Preview: Las Vegas Sands Corp.

Las Vegas Sands declares dividend on some shares

Financial Select Sector SPDR (NYSE: XLF) bull put spread

the ONN Idea Generating Platform — Tue, 16 Feb 2010 19:30:33 +0000

Because the Financial Select Sector SPDR (NYSE: XLF) contains a multitude of companies, the volatility of the index is typically less than its individual components. As such, trades on the XLF carry less event risk than buying an individual stock contained within. This is not to say the XLF is not without risk, but given its risk characteristics and the current market climate, we are okay taking a moderately bullish position on this ETF with an out-of-the-money bull put spread.

XLF Credit Spread Trade Details:

The XLF is currently trading at $14.16, up roughly 1.50% today.

Credit Spread/Bull Put Spread–

–Sell the March 14 put
–Buy the March 13 put
–Net credit of $0.30 (or better) for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.30 (the credit collected).

Maximum risk: $0.70 (the difference between strikes minus the credit collected). Return on risk is approximately 43% in 31 days.

Breakeven: $13.70 (the strike of the short put minus the premium).

For more on the XLF:

Trading a Range in the Financial Select Sector SPDR (XLF)

5 secrets of Wall Street, Part 3: Sector Rotation

Goldman Sachs Group, Inc. (NYSE: GS) bear call spread

the ONN Idea Generating Platform — Tue, 16 Feb 2010 18:00:55 +0000

Very similar to the broader market itself, Goldman Sachs Group (NYSE: GS) has not made much progress to the upside over the last few weeks. In fact, GS shares have been unable to pierce the 165 level since January 21st.

The stock has been trending higher in the past couple of days but does not seem to have the conviction to break out with strength to the upside (at least not in the short term). This option trading idea, a bear call spread, has 31 days until expiration and offers an attractive return on risk.

GS Credit Spread Trade Details:

GS is currently trading at $156.29, up about 1.5% today.

Credit Spread/Bear Call Spread –

–Sell the March 165 call
–Buy the March 170 call
–Net credit of $0.95 or better per spread

A free virtual trading account from OptionsHouse offers – among other tools – a probability calculator that helps project the likelihood of success for this trade.

Profit/Loss Details:

Maximum Profit: $0.95 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $4.05 (the difference between strikes minus the credit collected). Reward on risk is approximately 23% in 31 days.

Breakeven: $165.95 (the strike of the lower call plus the premium collected).

For more on GS:

Bull and bear outcomes on Goldman Sachs (NYSE: GS)

Goldman Sachs (NYSE: GS) iron condor

S&P 500 Index (SPX) bear call spread

the ONN Idea Generating Platform — Tue, 16 Feb 2010 16:30:37 +0000

The current theme in the market is to sell the rallies. The ONN Idea Generating Platform continues to find upside call spreads to help offset your long bullish positions or take a moderately bearish view.

Market participants have not been following through with bullish moves during the day and there is still uncertainly surrounding financial stability in the euro zone. Note: be sure to use limit orders when executing this bear calls spread in the S&P 500 Index (SPX).

SPX Credit Spread Trade Details:

SPX is currently trading at $1086.31, up about 1% today.

Credit Spread/Bear Call Spread –

–Sell the March 1150 call
–Buy the March 1170 call
–Net credit of $1.75 or better per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $1.75 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $18.25 (the difference between strikes minus the credit collected). Reward on risk is approximately 9.6% in 31 days.

Breakeven: $1151.75 (the strike of the lower call plus the premium collected).

For more on SPX:

The Gamma Effect on Volatility

Jobs Picture Reverts to the Mean

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

Deere & Company (NYSE: DE) Covered Call

the ONN Idea Generating Platform — Tue, 16 Feb 2010 15:16:34 +0000

This option-trading idea on Deere & Company (NYSE: DE) assumes a contrarian view and takes on a partial hedge. The stock has been strong of late, but has had a tough time breaking through technical resistance in the $54 zone. The company’s long-term fundamental picture looks decent, as global agriculture and construction demand is expected to increase.

While owning the stock outright doesn’t seem like a bad idea, a covered call (buy-write) can help mitigate risk in the short term by lowering the breakeven price through an options sale.

DE Covered Call Trade Details:

DE is trading at $53.72.

Covered Call –

–Sell the March 55 call (out-of-the-money) for $1.95 per contract.
–Buy 100 shares of stock for every sold call (current price for 100 shares is $5,372).

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum potential profit:, if assigned, is $3.23 (the premium received plus the difference between the strike price and the stock purchase price). Return on risk is approximately 6.2% in 31 days.

Maximum risk: $51.77 (the stock price at the time of purchase minus the credit).

Breakeven: $51.77 (the stock price at the time of purchase minus the credit).

A covered call has essentially three possibilities:

The stock can stay flat, leaving the out-of-the-money call to expire worthless. The investor keeps the premium and gains nothing on the purchased shares.
The stock can decline, at which point the option again expires worthless and the investor keeps the premium but takes a loss on the stock. In scenarios one and two, the covered call outperforms the stock side of the trade.
If DE rises above the 55 strike between now and March expiration (a 2.4% advance), the option will likely be exercised, capping the stock’s upside.

For more on DE:

Put strategies for Deere & Co. (NYSE: DE)

Moderate bullishness in Deere & Co. (NYSE: DE)

Deere & Co. Braces for Shareholder Vote on Executive Pay; Shares Up

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

Whole Foods Market, Inc. (NASDAQ: WFMI) cash-secured put

the ONN Idea Generating Platform — Fri, 12 Feb 2010 19:30:43 +0000

Whole Foods (NASDAQ: WFMI) reports earnings next week. For investors who like this best-of-breed natural foods retailer, a cash-secured put might be one way to play the event with implied volatility so high at 77% in the front-month February options. Selling the Feb 29 put for $1.00 or better offers a significant return on risk with fewer than five trading days until expiration, as long as you are comfortable with the risk of owning the stock at an effective cost of $28.00 regardless of how it trades on the reaction to its report next Wednesday.

WFMI Cash-Secured Put Trade Details:

WFMI is trading at $29.56, up roughly 1.2% today.

Cash Secured Short Put –

Sell the February 29 put for $1.00 or more
Net credit of $1.00
For every contract, set aside $2,800 in cash: [(29 - 1.00) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, should the stock drop and the put gets assigned, you can purchase WFMI at an effective price of $28.00, or 5.3% below its current price.

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum potential profit: 1.00 per contract (the premium collected) minus commissions. (This profit is for the short put option only and may change if the investor opts to buy the stock at $28.00).

Maximum risk: $28.00 (the strike price minus the premium collected). Return on risk for this trade is 3.6% in 7 days.

Breakeven: $28.00 (the strike price minus the premium collected).

For more on WFMI:

Whole Foods CEO pay valued at $653,671 in 2009

Whole Foods CEO to give up title of chairman-

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

PACCAR Inc. (PCAR) iron condor

the ONN Idea Generating Platform — Fri, 12 Feb 2010 18:00:39 +0000

Truck manufacturer PACCAR Inc. (NASDAQ: PCAR) is considered overvalued by many analysts with a triple-digit trailing twelve month P/E. If you are only moderately bearish on the stock and believe the stock could range trade between $31 and $39 for the next three months, this May short iron condor offers a very favorable return on risk.

The beauty of an option premium selling strategy like this is that you don’t have to carry it to expiration and can take profits sooner if the opportunity presents itself as time decay kicks in. Other data points to keep in mind are that PCAR will trade ex-dividend on 2/17/2010 and will likely report first-quarter earnings in late April.

Iron Condor Trade Details:

PCAR is currently trading at $35.80, up roughly 0.3% on the day.

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. Additionally, if you so choose, you should then be able to set a limit order for the spread as a whole, potentially securing a better credit.

Iron Condor Part I: Bull Put Spread –

–Sell the May 31 put
–Buy the May 30 put
–Net credit of $0.25 per spread

Iron Condor Part II: Bear Call Spread –

–Sell the May 39 call
–Buy the May 40 call
–Net credit of $0.25 per spread

Overall credit for the four-legged spread: $0.50

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.50 (the total premium collected) minus commissions.

Maximum risk: $0.50 (the difference between call strikes minus the premium collected). Return on risk is approximately 100% for this strategy.

Upper breakeven price: $39.50 (the strike of the sold call plus the total premium).

Lower breakeven price: $30.50 (the strike of the sold put minus the total premium).

More on PCAR:

Paccar says 4Q profit fell 59 pct to $46.1M

PCAR: Winning and Losing Plays on Paccar

Keep an eye on the “Trading Idea” section of www.ONN.tv for more option trading ideas from nine different strategies, courtesy of the ONN Idea Generating Platform.

SPDR Gold Trust (NYSE: GLD) bull put spread

the ONN Idea Generating Platform — Fri, 12 Feb 2010 16:30:07 +0000

If you believe that gold will find a bottom in 2010 near $1,050, then selling out-of-the-money (OTM) put spreads is one way to profit from that view. While this deep OTM April SPDR Gold Trust (NYSE: GLD) bull put spread collects only 20 cents, investors and traders should use it as “template” idea for possible bottom-picking strategies as the market continues to trade lower in this correction for all risk assets. On fear spikes lower, implied volatility (as well as the delta values of these spreads) will rise significantly and you may be able to sell a $1-wide spread for between 30 and 40 cents.

GLD Credit Spread Trade Details:

GLD is currently trading at $106.60, down roughly 0.50% today.

Credit Spread/Bull Put Spread–

–Sell the April 100 put
–Buy the April 99 put
–Net credit of $0.20 (or better) for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.20 (the credit collected).

Maximum risk: $0.80 (the difference between strikes minus the credit collected). Return on risk is approximately 25% in 63 days.

Breakeven: $99.80 (the strike of the short put minus the premium).

For more on GLD:

CNBC – The Gold Standard

Gold Miners and Due Diligence

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

FedEx Corporation (NYSE: FDX) bear call spread

the ONN Idea Generating Platform — Fri, 12 Feb 2010 15:17:28 +0000

For investors who are neutral to bearish on the economic recovery in the first quarter of 2010, collecting premium on a shipping/transportation name with exposure to both corporate and consumer spending might be a good short term play. This out-of-the-money bear call spread on FedEx Corporation (NYSE: FDX) offers a substantial return in about 35 days.

Investors should note that the company reports earnings the day before these March options expire, and they would want to evaluate the risk/reward profile of the trade with that in mind, with one possibility being to initiate the position now and then be ready to close it before the company reports.

FDX Credit Spread Trade Details:

FDX is currently trading at $77.82, down about 2.15% today.

Credit Spread/Bear Call Spread –

–Sell the March 80 call
–Buy the March 85 call
–Net credit of $1.45 or better per spread

By opening a free virtual trading account with OptionsHouse, you could build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum Profit: $1.45 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $3.55 (the difference between strikes minus the credit collected). Reward on risk is approximately 41% in 35 days.

Breakeven: $81.45 (the strike of the lower call plus the premium collected).

For more on FDX:

FOX Business- FedEx & General Mills Report Earnings

Sellers in Harley-Davidson, Inc. (HOG) and FedEx Corporation (FDX)

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

Rambus Inc. (NASDAQ: RMBS) cash-secured put

the ONN Idea Generating Platform — Thu, 11 Feb 2010 19:30:57 +0000

CNBC’s Jim Cramer likes Rambus (NASDAQ: RMBS) and so do the two analysts that follow the shares. The firm had a strong earnings report last quarter and received a favorable ruling in a suit against NVIDIA (NYSE: NVDA). As an alternative to buying the stock outright, the Idea Generating Platform has found a cash-secured put with a decent return that may allow you to buy the stock at a discount if it drops.

RMBS Cash-Secured Put Trade Details:

RMBS is trading at $21.70, up roughly 2.1% today.

Cash-Secured Short Put –

–Sell the March 20 put for $0.80 or more
–Net credit of $0.80
–For every contract, set aside $1,920 in cash: [(20 - 0.80) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, should the stock drop and the put gets assigned, you can purchase RMBS at an effective price of $19.20, or 11.5% below its current price.

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum potential profit: $0.80 per contract (the premium collected) minus commissions. (This profit is for the short put option only and may change if the investor chooses to buy the stock at $19.20).

Maximum risk: $19.20 (the strike price minus the premium collected). Return on risk for this trade is 4.2% in 36 days.

Breakeven: $19.20 (the strike price minus the premium collected).

For more on RMBS:

Rambus Down Ahead of After-Market Earnings Report

Rambus (NASDAQ: RMBS) Bull Put Spread

Jud Pyle quoted in Reuters.com article- Rambus shares fall on possible trial delay

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

InterMune, Inc. (NASDAQ: ITMN) bull call spread

the ONN Idea Generating Platform — Thu, 11 Feb 2010 18:00:22 +0000

Based on past reporting dates, InterMune, Inc. (NASDAQ: ITMN) earnings are expected on or around February 25th. With 12 analysts covering the stock, the consensus estimate is for a loss of 70 cents per share, with high and low estimates at losses of 63 cents and 91 cents, respectively.

The firm’s developing lung drug will be evaluated by the Food and Drug Administration’s advisory panel in a meeting in March. This could be a high-volatility event that could drive the stock either way. Many traders are leaning bullish and the Idea Generating Platform is as well with an out-of-the-money bull call spread. Price targets are $25 and higher for ITMN.

ITMN Debit Spread Trade Detail

ITMN is currently trading at $15.64, up about 1.2% today.

Debit Spread/Bull Call Spread -

–Buy the April 15 call
–Sell the April 20 call
–Net debit of $2.00 or less

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum risk: $2.00 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $3.00 (the difference between strike prices – 5 – minus the debit of $2.00). Return on risk is approximately 150% in 64 days.

Breakeven: $17.00 (the strike price of the purchased call plus the debit paid).

For more on ITMN:

Options activity spikes on InterMune (ITMN)

InterMune gets March FDA review for lung drug

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

Apple Inc. (NASDAQ: AAPL) bear call spread

the ONN Idea Generating Platform — Thu, 11 Feb 2010 16:30:10 +0000

Apple (NASDAQ: AAPL) has been struggling to the upside and the $208-$209 zone seems to be acting as technical resistance for AAPL. The stock has been really been coiling here and volume has been dissipating; typically this precedes a large move in the stock. Based on current technicals and market action, this move will most likely be to the downside.

AAPL Credit Spread Trade Details:

AAPL is currently trading at $195.18, roughly unchanged on the day.

Credit Spread/Bear Call Spread –

–Sell the March 210 call
–Buy the March 220 call
–Net credit of $1.52 per spread or better

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $1.52 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $8.48 (the difference between strikes minus the credit collected). Reward on risk is approximately 18% in 36 days.

Breakeven: $211.52 (the strike of the lower call plus the premium collected).

For more on AAPL:

On the Call: Comcast CEO on Apple’s iPad

Apple (NASDAQ: AAPL) volatility drops after iPad announcement

Apple (NASDAQ: AAPL) options volume tops Tuesday action

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

JPMorgan Chase & Co. (NYSE: JPM) bull put spread

the ONN Idea Generating Platform — Thu, 11 Feb 2010 15:04:38 +0000

The ONN Idea Generating Platform is taking a moderately bullish stance on JPMorgan Chase (NYSE: JPM), as there is technical support around the 35-36 area. Many analysts are calling for stabilization in the financial space and even appreciation in some names, including JPM. Of the 23 analysts that cover JPM, just two list the stock as a “sell.”

JPM Credit Spread Trade Details:

JPM is currently trading at $38.67, down roughly 0.50% today.

Credit Spread/Bull Put Spread –

–Sell the March 35 put
–Buy the March 32 put
–Net credit of $0.36 (or better) for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.36 (the credit collected).

Maximum risk: $2.64 (the difference between strikes minus the credit collected). Return on risk is approximately 13.6% in 36 days.

Breakeven: $34.64 (the strike of the short put minus the premium).

For more on JPM:

JPMorgan CEO Dimon gets $16M stock bonus for 2009

Winners and losers in J.P. Morgan (NYSE: JPM) option plays

Valero, JPMorgan options activity post-earnings

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

Citigroup (C) bull call spread

the ONN Idea Generating Platform — Wed, 10 Feb 2010 19:30:16 +0000

Implied volatilities in Citigroup (NYSE: C) have recently perked back up above 45. That means that in-the-money call spread buyers are getting paid more than previously to bet the stock stays above $3. In fact, the stock has not traded below $3 since July. For investors who think this trend continues, here is a bull call spread.

C Debit Spread Trade Detail

C is currently trading at $3.19, up about 0.3% today.

Debit Spread/Bull Call Spread

Buy the June 2 call
Sell the June 3 call
Net debit of 80 cents

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum risk: $0.80 (the debit paid at the time of the trade) plus commissions.

Maximum potential profit: $0.20 (the difference between strike prices – 1 – minus the debit of 80 cents). Return on risk is approximately 25%.

Breakeven: $2.80 (the strike price of the purchased call plus the debit paid).

For more on C:

S&P cuts outlook on Citigroup, Bank of America

Cramer’s take and option strategies on Citigroup (C)

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

Potash Corp. Saskatchewan (NYSE: POT) bull put spread

the ONN Idea Generating Platform — Wed, 10 Feb 2010 18:00:01 +0000

As Karla Yeh noted this morning in the Sidewinder report, bullish option traders emerged in Mosaic (NYSE: MOS) today, buying a March 70-75 call one-by-two. For investors who favor MOS competitor Potash Corp. Saskatchewan (NYSE: POT), which could be set to rally along with MOS if not outperform its peer, here is a bull put spread option strategy.

POT Credit Spread Trade Details:

POT is currently trading at $106.07, up roughly 0.45% today.

Credit Spread/Bull Put Spread–

Sell the June 95 put
Buy the June 90 put
Net credit of $1.60 for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $1.60 (the credit collected).

Maximum risk: $3.40 (the difference between strikes minus the credit collected). Return on risk is approximately 47% in roughly four months.

Breakeven: $93.40 (the strike of the short put minus the premium).

For more on POT:

Potash (NYSE: POT) drop inspires options traders

Stock Repair Using Option Ratios

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

A bear call spread on Potash Corp. (NYSE: POT)

Google Inc. (NASDAQ: GOOG) iron butterfly

the ONN Idea Generating Platform — Wed, 10 Feb 2010 16:29:20 +0000

Late Tuesday, Baidu, Inc. (NASDAQ: BIDU ) announced earnings. Everyone knows BIDU is the company that stands to benefit from an exit from China by Google (NASDAQ: GOOG). But what if you believe the market on GOOG stock is fairly efficient, and the stock could stay in this area for the next four months? Here is an iron butterfly for you to try.

Iron Butterfly Trade Details:

GOOG is currently trading at $531.00, down about 1% today.

Below are the elements (one straddle, one strangle) for this iron butterfly. 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. 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 Butterfly Part I: Short Straddle –

Sell the June 530 put
Sell the June 530 call
Net credit of $68.00 per spread

Iron Butterfly Part II: Long Strangle –

Buy the June 430 put
Buy the June 630 call
Net debit of $12.00 per spread

Overall credit for the spread: $56.00

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $56.00 (the total premium collected). Minus commissions. Maximum profit occurs if GOOG is trading at the 530 strike come June expiration.

Maximum risk: $44.00 (the difference between call or put strikes minus the premium collected). Return on risk for this strategy is roughly 127%.

Upper breakeven price: $586.00 (the strike of the sold call plus the premium received).

Lower breakeven price: $474.00 (the strike of the sold put minus the premium).

For more on GOOG:

Google’s email gets social in Facebook face-off

Winning and Losing options plays in Google (NASDAQ: GOOG)

Keep an eye on the “Trading Idea” section of www.ONN.tv for more option trading ideas from nine different strategies, courtesy of the ONN Idea Generating Platform.

CVS Caremark Corporation (NYSE: CVS) bull put spread

the ONN Idea Generating Platform — Wed, 10 Feb 2010 15:08:10 +0000

This weekend’s Barron’s highlighted CVS Caremark Corporation (NYSE: CVS) as a name with limited downside. Shares of the pharmaceutical and health-and-beauty aids retailer have been shifting slowly higher following an early-November pullback. Investors who expect neutral to bullish price action from the shares might consider a bull put spread for an option trading idea.

CVS Credit Spread Trade Details:

CVS is currently trading at $32.71, basically flat today.

Credit Spread/Bull Put Spread–

Sell the March 32 put
Buy the March 31 put
Net credit of $0.28 for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $0.28 (the credit collected).

Maximum risk: $0.72 (the difference between strikes minus the credit collected). Return on risk is approximately 39% in 37 days.

Breakeven: $31.72 (the strike of the short put minus the premium).

For more on CVS:

Sidewinder Update: CVS (NYSE: CVS), Biogen Idec (NASDAQ: BIIB)

Put buyers in CVS, Freeport McMoRan, and Paychex

Insight Into LEAPS Call Buyer in CVS

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

iShares Russell 2000 Index (NYSE: IWM) bear call spread

the ONN Idea Generating Platform — Tue, 09 Feb 2010 19:33:59 +0000

For traders who are bearish on the broad market and want to take advantage of today’s rally to get short, a short call spread on an index ETF might be the order of the day. Selling the March 62/63 call spread on the iShares Russell 2000 Index (NYSE: IWM) offers the opportunity to earn a potential 37% return on risk with the short strike being only 4.2% away from current levels.

IWM Credit Spread Trade Details:

IWM is currently trading at $59.35, up roughly 1.2% today.

Credit Spread/Bear Call Spread–

Sell the March 62 call (out-of-the-money)
Buy the March 63 call (out-of-the-money)
Net credit of $0.29 per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $0.29 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $0.71 (the difference between strikes minus the credit collected). Reward on risk is approximately 41% in 39 days.

Breakeven: $62.29 (the strike of the lower call plus the premium collected). This is 5% above the index’s current level.

For more on IWM:

ETF Preview: Most Funds Soggy in Early Going – Solar Earnings Due in After-Hours

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

True Religion Apparel, Inc. (NASDAQ: TRLG) bear call spread

the ONN Idea Generating Platform — Tue, 09 Feb 2010 18:00:31 +0000

Shares of designer denim retailer True Religion Apparel, Inc. (NASDAQ: TRLG) have yet to recover from a 24% drop in November that was spurred by an updated earnings guidance. Perhaps investors are nervous to bet on a company that peddles expensive discretionary items, but the stock has been range-bound around the 20 level for the past 3-1/2 months. Additionally, the stock recently slipped below its 50-week moving average. Investors who want to express a moderately bearish view on the shares could consider a bear call spread option trading strategy.

TRLG Credit Spread Trade Details:

TRLG is currently trading at $18.99, up roughly 1.4% today.

Credit Spread/Bear Call Spread–

Sell the March 20 call (out-of-the-money)
Buy the March 22.50 call (out-of-the-money)
Net credit of $0.60 per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $0.60 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $1.90 (the difference between strikes minus the credit collected). Reward on risk is approximately 32% in 39 days.

Breakeven: $20.60 (the strike of the lower call plus the premium collected). This is 8.5% above the stock’s current level.

For more on TRLG:

True Religion names Lynne Koplin operating chief

Midnight Trader’s Analyst Notebook: TRLG

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

Yahoo! (NASDAQ: YHOO) bear call spread

the ONN Idea Generating Platform — Tue, 09 Feb 2010 16:39:59 +0000

Scared of the Facebook boogie man? Yahoo! Inc. (NASDAQ: YHOO) may be under pressure as chatter increases around Facebook offering a full-blown new email service that could steal usage and ad revenue.

Yahoo’s! stock has been trying to recover ever since the refusal of a Microsoft (NASDAQ: MSFT) buyout bid some time ago. This moderately bearish trade offers traders a chance to take a bearish stance, while dramatically reducing their risk when compared to shorting YHOO stock.

YHOO Credit Spread Trade Details:

YHOO is currently trading at $15.02, up roughly 0.30% today.

Credit Spread/Bear Call Spread–

Sell the March 16 call (out-of-the-money)
Buy the March 18 call (out-of-the-money)
Net credit of $0.24 per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $0.24 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $1.76 (the difference between strikes minus the credit collected). Reward on risk is approximately 13.6% in 39 days.

Breakeven: $16.24 (the strike of the lower call plus the premium collected).

For more on YHOO:

Online ad improvement seen in IAC’s 4Q loss

Option strategies in Yahoo! (NASDAQ: YHOO)

Yahoo! (YHOO) Sees Longer-Term Put Selling

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

MasterCard Incorporated (NYSE: MA) bull put spread

the ONN Idea Generating Platform — Tue, 09 Feb 2010 15:00:35 +0000

On February 4th, MasterCard Incorporated (NYSE: MA) posted disappointing earnings, which fell short of analysts’ expectations. This shortfall was mainly due to higher-than-expected costs. This announcement coincided with the ongoing correction in the S&P 500 Index (SPX), sending the stock sharply lower.

MasterCard did also announce that in 2010, it expects net revenue growth to be better than the 3.9% growth it experienced in fiscal 2009. The stock has been forming a bit of a base here and has not fallen below its 200-day moving average. This moderately bullish trade puts the breakeven below the 200-day moving average, which is perched around $209.00.

MA Credit Spread Trade Details:

MA is currently trading at $226.40.

Credit Spread/Bull Put Spread–

Sell the March 210 put
Buy the March 200 put
Net credit of $1.50 for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum profit: $1.50 (the credit collected).

Maximum risk: $8.50 (the difference between strikes minus the credit collected). Return on risk is approximately 17.6% in 39 days.

Breakeven: $208.50 (the strike of the short put minus the premium).

For more on MA:

Sector Update: Financials on the Rise Amid China Concerns, BAC probe

Put selling in MasterCard (NYSE: MA) post-earnings

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

Energy Select Sector SPDR (XLE) iron condor

the ONN Idea Generating Platform — Mon, 08 Feb 2010 19:30:22 +0000

The Energy Select Sector SPDR (NYSE: XLE) has traded between $45 and $60 since last July as crude oil has ascended in a rising channel from $60 to $85. With market expectations finally beginning to price in the over-supply fundamentals, oil may trade between $75 and $65 for the next six weeks before the seasonal effects begin to take over and challenge the highs.

Though the high positive correlation between the ETF and the commodity is not guaranteed, this March iron condor on the XLE would likely take advantage of any range for crude between $60 and $80. Collecting 45 cents on $2-wide spreads offers a potential return on risk of 29%.

Iron Condor Trade Details:

XLE is currently trading at $54.28, roughly flat on the day.

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. Additionally, if you so choose, you should then be able to set a limit order for the spread as a whole, potentially securing a better credit.

Iron Condor Part I: Bull Put Spread –

Sell the March 48 put
Buy the March 46 put
Net credit of $0.18 per spread

Iron Condor Part II: Bear Call Spread –

Sell the March 59 call
Buy the March 61 call
Net credit of $0.27 per spread

Overall credit for the four-legged spread: $0.45

Open a free virtual trading account with OptionsHouse to build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum profit: $0.45 (the total premium collected) minus commissions.

Maximum risk: $1.55 (the difference between call strikes minus the premium collected). Return on risk is approximately 29% for this strategy.

Upper breakeven price: $59.45 (the strike of the sold call plus the total premium).

Lower breakeven price: $47.55 (the strike of the sold put minus the total premium).

More on XLE:

ETF Preview: Most Funds Soggy in Early Going – Solar Earnings Due in After-Hours

Trading an Iron Condor Strategy on the Energy Select Sector SPDR (NYSE: XLE)

Keep an eye on the “Trading Idea” section of www.ONN.tv for more option trading ideas from nine different strategies, courtesy of the ONN Idea Generating Platform.

Dell Inc. (DELL) cash-secured put

the ONN Idea Generating Platform — Mon, 08 Feb 2010 18:29:51 +0000

After investors were underwhelmed by the last two quarterly earnings reports from Dell Inc. (NASDAQ: DELL), the stock was taken from its 52-week high of $17.26 down to just below $13.00 in both December and February. This double-bottom on the chart seems to have both bullish fundamental and technical investors ready to take the stock higher and it is one of the strongest technology gainers today in a quiet market. For option investors looking to take advantage of a potential rally in Dell shares, this cash-secured put idea lets you take the risk of buying the stock at the discounted price of $11.50 while keeping the $1.50 you collect up front if DELL stays above $13.

DELL Cash-Secured Put Trade Details:

DELL is trading at $13.60, up roughly 2.6% today.

Cash-Secured Put –

Sell the DELL May 13 put for $1.50 or more
Net credit of $1.50
For every contract, set aside $1,150 in cash: [(13 - 1.50) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, you’ll have purchased the DELL at an effective price of $11.50, or 18.3% below their current price.

By opening a free virtual trading account with OptionsHouse, you could build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum potential profit: $1.50 per contract (the premium collected) minus commissions.

Maximum risk: $11.50 (the strike price minus the premium collected). Return on risk for this trade is 7.6% in 102 days.

Breakeven: $11.50 (the strike price minus the premium collected).

For more on DELL:

A Long-Term Bull Put Spread Trades on Dell (NASDAQ: DELL)

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

NYSE Euronext (NYSE: NYX) bear call spread

the ONN Idea Generating Platform — Mon, 08 Feb 2010 16:31:22 +0000

NYSE Euronext (NYSE:NYX) shares have broken down below their 200-day moving average and the 50-day currently sits at $24.50. As trading volumes dwindle and the broad market looks poised for lackluster trading ranges until Eurozone uncertainty and Fed exit strategies have more clarity, selling call spreads on the exchanges may be one way to create additional option trading income.

NYX Credit Spread Trade Details:

NYX is currently trading at $23.07.

Credit Spread/Bear Call Spread–

Sell the February 24 call
Buy the February 25 call
Net credit of $0.21 per spread

By opening a free virtual trading account with OptionsHouse, you could build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum Profit: $0.21 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $0.79 (the difference between strikes minus the credit collected). Reward on risk is approximately 27% in 11 days.

Breakeven: $24.21 (the strike of the lower call plus the premium collected).

For more on NYX:

Nasdaq OMX profit grows even as revenue falls

Business events scheduled for the coming week

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.

A Visa Inc. (NYSE: V) bull put spread

the ONN Idea Generating Platform — Mon, 08 Feb 2010 15:20:00 +0000

Many investors incorrectly assume that a company like Visa (NYSE:V) has exposure to the downside of consumer credit, namely default rates. But V is actually in the financial technology and transaction business and continues to see steady growth as its brand and services dominate online shopping and payment systems.

They build “tollbooths” for the internet economy and are a favorite of equity portfolio managers, but their institutional ownership stands at only 48%. For investors who believe in their growth story, they might consider a bull put spread to generate revenue off of this name.

V Credit Spread Trade Details:

V is currently trading at $83.44.

Credit Spread/Bull Put Spread–

Sell the March 80 put
Buy the March 75 put
Net credit of $1.15 for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum profit: $1.15 (the credit collected).

Maximum risk: $3.85 (the difference between strikes minus the credit collected). Return on risk is approximately 30% in 39 days.

Breakeven: $78.85 (the strike of the short put minus the premium).

For more on V:

Sector Update: Financials

Volatility Plays on Visa Inc. (NYSE: V)

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.