If you agree that DRI will continue its overall downtrend, consider the following trade that relies on the stock staying below $125 through expiration in eight weeks. Buy to Open DRI 19Aug 130 call (DRI220819C130) Sell to Open DRI 19Aug 125 call (DRI220819C125) for a credit of $1.50 (selling a vertical) This credit is $0.05 less than the mid-point of the option spread when DRI was trading at $120. Unless the stock drops quickly from here, you should be able to get close to this amount. Your commission on this trade should be no more than $1.30 per spread. Each spread would then yield $148.70. This trade reduces your buying power by $500 and makes your net investment $351.30 ($500 – $148.70) for one spread. If DRI closes below $125 on August 19, both options will expire worthless and your return on the spread would be 42% ($148.70/$351.30).
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I look forward to having you on board, and to prospering with you.
Terry |