18may - read the postings from the bottom first.. stock was at $39 at time of trade, now at $31 ish. mikes no cost collar is worth about $4.70..so he made 4.70..ie his hedge gained him $470 per lot vs a stock loss of $800ish... stock actually dropped so far that his collar rebounded and turned out better than my alternative trade.
google docs spreadsheet on mikes trades: mikes spreadsheet
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4may - stock at 34.75 today so the collar is working as expected. that no cost collar is now about $1.70.. so from airing date the stock is down $4 but you only had $1.70 of protection. my alternative put spread collar is going for about $2.62..so a dollar more in protection you received. two more weeks to go till opex. revisit them
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3/27 -Mike khouw recommended a no cost collar on $BRCM on todays Fast Money show.. although is not from the friday optionsaction show melissa lee prefaced the segment as Options Action so i will include it on this blog.. mike saw some unusual options activity in the name and made the following recommendation for a trade.. a no cost collar:
Sell the May 42 call at .90
Buy the May 36 put for .90
total price is zero.. just commissions.
See this trade and the others from this blog in google docs spreadsheet --> spreadsheet
it was implied that this trade be put on if you are long the stock. lets look at the chart below.. stock closed at 38.95 and with this trade you will benefit from upside up to 42 at may opex. if you do nothing at opex and stock is at 42 or higher your stock will be called away (sold by broker at 42).. not bad.. about 10% upside. the other half is that you are buying a 36 put, your put gains as stock goes below 36..so about 8% away. i wouldnt say its a bad trade but if i was going to cap my upside (by selling a call) i would want almost immediate downside protection.. not protection after already losing 8%... i would accept the trade off of capping my downside protection vs having to eat an 8% loss first.
so my alternative to this would be to make it a "put spread collar".. i will use closing prices off yahoo..
Sell the May 42 call at .76
Buy the May 39 put at 2.09
Sell the May 36 put at .96
total debit .37 per 1lot
So with this position i will start getting downside protection at 38.63 ... just about 30cents lower vs having to eat a loss down to 36 first.. yes my max gain on the put spread portion is the $3 wide put spread. but i prefer the near immediate protection.. thats just me, i dont follow this stock at all, you might have some insight that would make you want to take mikes trade.. just an alternative to think about.
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