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How to Make 40% in 45 Days With a Bet on Ford:
Several articles have been published lately which are bullish on Ford, including Ford and Its 4.8% Dividend Yield, and Ford: Break-Out Ahead
On Friday, when F was trading at $12.54, I made a bet that this high dividend yield would at least keep the stock where it is right now for the near future.
Here is the trade I made:
With F trading at $12.54:
Buy To Open # F 28Apr17 11.5 puts (F170428P11.5)
Sell To Open # F 28Apr17 12.5 puts (F170428P12.5) for a credit of $.30 (selling a vertical)
This spread is called a vertical put credit spread. I prefer using puts rather than calls if I am bullish on the stock because if you are right, and the stock is trading above the strike price of the puts I sold on expiration day, both put options will expire worthless and no further trades need to be made or commissions payable.
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For each contract sold, I would receive $30 less commissions of $1.00 (the rate that www.TastyWorks.com charges). By the way, you should check out this new brokerage firm because their commission rates are just about the best you will find anywhere. Here they are:
Yes, that’s true. Absolutely no commissions when you close out a trade. TastyWorks was started early this year by the same people who started thinkorswim (which was later sold to TD Ameritrade). They haven’t quite set up everything yet, but the commission rates and great trading platform is bound to attract many new subscribers (tell them we sent you, by the way). We don't have a link set up yet, but if you email seth@terrystips.com your new TastyWorks account number and the date it was funded, we will extend you 4 free months of our premium service absolutely FREE! This must be a new account funded with $2000 or more.
The broker will place a $100 maintenance requirement on the above spread. Subtracting out the $29 you received, your net investment is $71 per spread ($100 - $29). This is also the maximum loss you would incur if F closes below $11.50 on April 21, 2017 (unless you rolled the spread over to a future month near the expiration date, something I often do, usually at a credit, if the stock has lost a bit since the original trade was placed).
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Making a gain of $29 on an investment of $71 works out to 40% for the 6 weeks you will have to wait it out. That works out to over 300% annualized. Who says options can’t be fun?
As with all investments, option trades should only be made with money that you can truly afford to lose.
Happy trading.
Terry
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Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts. seth@terrystips.com
You can see every trade made in the actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself?
Even better, you can become a Terry’s Tips Insider, and receive all our educational reports and materials absolutely free by opening a new account at the best options broker around - thinkorswim. If you open an account with our link, they will give you 60 days of free trading or up to $600, the same deals they give to everyone who opens an account with them. You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Seth@TerrysTips.com and let him know that you have done it, and this is what he will do – sign you for our Premium Service package ($119.95 value plus an extra 4 months of our Premium Service, valued at another $190.80). You get $300.65 worth of services without paying us one penny.
I look forward to having you on board, and to prospering with you.
Terry
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