Trade of the Day – JOYG December Credit Spreads

JOYG ($88.64) is expected to announce earnings on Wed, December 14th, two days before December expiration.

Breakdown: I sold the JOYG December 90-87.5 Put Credit Spread and 90-92.5 Call Credit Spread for $2.30 total.

Profitable – I make money on this trade if JOYG closes between $87.70 and $92.30 by December 16, 2011.

Break-even – I break-even on this trade if JOYG closes at $87.70 or $92.30 by December 16, 2011.

Unprofitable – If JOYG closes below $87.70 or above $92.3, this trade will be unprofitable. The most I can lose is the amount the spread can be worth, $2.50, minus the amount I sold it for, $2.30.

The reason I like this trade: I have traded probably 500 different stocks throughout 10 years but I have never had a position on in JOYG. Sometimes there are trades that line up so well on a risk vs. reward basis, as in JOYG today, that its hard to resist trading a new stock. I was searching through option volume and saw that the December 90 Calls in JOYG had a high vol and have traded over 7k contracts yesterday. They do not have earnings until December expiration. This means if JOYG does not do too much and stays at $90, I could make $2.30 and I am only risking $0.20. This is a no-brainer and too good of a trade for me to turn down. The x-dividend of $0.175 per share, expected near December 1st, is not a factor to me. Most likely, this trade will not work but if it does, it will be a great trade. Please feel free to email me with any questions regarding this trade at Andrew@KeeneOnTheMarket.com.

 

Regards,

Andrew R. Keene

KeeneOnTheMarket.com