First Class or Cargo on United Airlines (UAUA)

The airlines in general have been on a tear.  United (UAUA) broke out on the daily chart back on Dec 1 at $8 and we are sitting just below resistance at $13.93 right now.  Take a look:

We have earnings coming up and IV (implied volatility – think of this like a measure of the buying pressure on the options) is high.  Here’s my thinking…

Once the “unknown” of the earnings announcement becomes known (either through the actual announcement, pre-announcement, or another carrier’s information) the IV will deflate out.  Short of a big surprise that should happen quickly and without a ton of price movement.  So, I’m going to sell an ATM call and an ATM put  (short strangle).

Now, the probabilities of all of this happening correctly are a bit low (I figure 30%) so I’m going to do few things.

1. I’m  going buy a put or call for each short for protection.  If UAUA goes to $0 (zero) or goes to $100 I’m protected.
2. If I get some movement, but not a lot, I’m going to close the costly side and reposition.  This will help increase my probabilities.
3. I’m going to severely limit the amount of capital I have risked on this trade.

Max Profit (if held to expiration and price stays right at $14) would be $1,700 on $200 risked.   Likely profit (two weeks in, price stays within breakevens or at least I’m able to adjust) would be $200 on $200 risked.

If I’m wrong I only lose the $200, if I’m right I could double my money.  If I’m really right I could make 500%.

Hmm… I just saw something that would keep me from doing this trade.  Can you guess?

Mojo

Popularity: 8% [?]

Share This

If you enjoyed this post, make sure you Subscribe to Insane Money by Email

Test Driving a Modified Iron Condor

In tonight’s team meeting we are going to be test driving a new modified 60/40 iron condor.  The idea here is that we will be selling lots of implied volatility (premium) and (unlike regular iron condors) we will be expecting to adjust.  By selling lots of premium we should have plenty of cash to pay for those adjustments.

As part of this, I will show you how to create and test a new strategy and use some of the new backtesting features (OnDemand) of TOS.  I will be using this strategy through 2010.

See you tonight at 730 ET.

Mojo

Popularity: 11% [?]

Share This

If you enjoyed this post, make sure you Subscribe to Insane Money by Email

Avatar – Best Movie I’ve Seen in Many Years!

I accepted an invitation to go see Avatar with a friend of mine.  My expectations were fairly low since I wasn’t really excited from the previews.  We went this morning.  I was blown way and can’t say enough good things about it!

Great mixture of logic, spiritualism, philosophy and military arts combined with differing technologies and a compelling storyline beautifully executed.   (I love the animals, hardware, and homage to the better parts of our oceans.)

This movie is a game changer and will create a series of sequels that will set new records for revenue and profits.  I haven’t been this excited about a movie since the original Star Wars.  Awesome!

I will be taking my kids to see it soon (11 and 12).

Mojo

Popularity: 11% [?]

Share This

If you enjoyed this post, make sure you Subscribe to Insane Money by Email