2008 - 4
Execute this options trade. Purchase 1000 shares of UYG at $8.65. That is the Proshares Ultra Financials in the US. Basically a basket of financial stocks. Take a look at a chart, you will see what has happened with this ETF. Sell 10 UYG December 2008 $10 calls at $2.90. This means you are now long UYG at a cost of $5.75. Now sit and wait. You put up $8650 to purchase shares, you collected $2900 for selling options so net out of pocket is $5750. That is your max risk as long as you hold the two positions together. Your potential gain is $4.25 per share or $4250 which is almost 74%. You will achieve that if UYG is at or above $10.00 on 3rd Friday of December ( 10 weeks from now ). This is a typical ( actually fairly conservative ) options hedging strategy.
Options Guy
Editor
Surviving The Game
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