[Opening Straddle on Burlington Resources (BR)/Simultaneously Buying Aug 90 Call (BRHR) and Aug 90 Put (BRTR)/Day Order/Limit $9.00]
Dear Member:
I am placing an order to open an Aug 90 straddle on Burlington Resources (BR). I am placing the order to buy the Aug 90 calls (BRHR) and the Aug 90 puts (BRTR) for a net debit of $9.00. The implied volatility is currently in only the 2d percentile and that means the options are quite inexpensive relatively speaking. A jump in volatility could increase the price of both the puts and the calls. A sharp move in either direction could make this a profitable trade as well. As is always the case, assuming no adjustments, the most I could lose is my initial investment, but that would only happen if I kept the position until expiration and the stock closed at exactly 90 at expiration. Theoretically, the upside is unlimited for calls and is limited for the puts only if the stock goes to zero.
As I have said before, many straddles result in losses, but those that win can be large winners.
DISCLOSURE: At the time of publication, I have no position in the referenced options or the underlying stock.
Sincerely,
Bill Kraft for
CutLoss, Inc.
|
