Options Action –
Well, due to the terrorist attack and subsequent news coverage Options Action did not appear on CNBC this past week. They do however post short videos of trades that are based on ideas from viewers. A viewer wrote in that they were bullish on AIG and the trade suggestion around this was to buy a AIG May 39 Call at 1.20. Break even on this trade is 40.20 and it is noted that the 52 week high for AIG is above this level. Also, the idea is to catch a potential bullish move off of earnings which are announced on May 2.
The guest author of the Striking Price column this week was Dennis Davitt from Harvest Volatility Advisors. His discussion started off with mentioning how active VIX was last week and the futures volume record that was set on Monday. He attributed a combination of Apple’s stock action (AAPL – 390.53), the terrorist attack in Boston, and the huge volatility in the price of gold as factors contributing to the action in VIX last week. As a hedge against a market drop this summer Davitt suggested a put spread on the SPDR S&P 500 ETF Trust commonly known as SPY. He notes that a cheaper method of hedging against a pullback in the market this summer might be buying a SPY Sep 150 / 140 Put Spread where the SPY Sep 150 Put would be purchased and a SPY 140 Put would be sold.