Bonus Free Trade Alert!
February 26th, 2008. Posted by AppleOption
AppleOption would like to share a free bonus trade.
If you haven’t already heard, Google was punished today and dropped to an intraday low of $446.85. The plummet was due to “old” news from comScore reporting that clicks were down month to month and flat year to year. This is old news as it is exactly what was shared previously by Google in their 10K report and during their recent earnings call. The previous news dropped Google from $550 to $500. We now saw another $50 drop, to a new 52wk low.
Click to enlarge the 10-day Chart
Back in November, Google broke $700 and there was all sorts of speculation that it would soon see $1000. There was a massive amount of premium on the LEAPS. Mid-December the 2010 $1,100 Call was trading for $50+, and more recently when Google was trading in the $550’s the contract was selling for ~$7.
Click to enlarge the 2010 $1100 Call Chart
Last item on the above chart to notice is today’s value of that same option.
The option chain below has a closing option mark value $4.40 (bid $4, ask $4.80), while Google closed at $464.19.
The Bonus Trade:
BUY TO OPEN: Jan 2010 $1,100 Call (YVDAP) - 2 Contracts for $4.50 or less
Once that order is filled, then
SELL TO CLOSE: Jan 2010 $1,100 Call (YVDAP) - 1 Contract for $19.00
In order for this closing trade to fill, Google must return to the $550-600 range. At this point the trade would net +100% return. The remaining contract is “free” and one would hold until Google $700+ is achieved. At which point you could easily sell for $50+ and net a nice +1000%. This trade obviously assumes that Google will return to it’s previous levels.
Googles PEG is currently an astoundingly low 0.67. Long-term fundamentals favor Google at these prices. The patient investor will be handsomely rewarded if they notice the value despite the short-term trader panic!
Total risk of the trade: $4.50 * 100 shares * 2 contracts = $900
Targeted long term return: $19 * 100 shares * 1 contract = $1900+
The remaining contract is then your leverage for additional profit.
Disclaimer: Please read our legal page, as we recommend you consult your financial advisor prior to acting on the above information.