We are adding MOS here in the HMM Newsletter service
It is up a decent amount today, but it is taking out highs and we think it has room to really run. it is a volatile stock, so be forewarned.
The volatility allows us to sell upside calls at a slightly higher price then we could normally.
MOS has had earnings out a few days ago, but could be affected by POT whose earnings is due out next week.
With the stock slightly up today we are expecting a slight pullback, a breather, so we are going to play for that by going 1 to 1 on the Diagonal.
When the stock does pullback then we can buy back one of the upside calls and lock in a little profit.
For those that are a little more conservative you can move up your long strike to have less capital at risk.
We are looking at this spread with the stock at $73.25
Buy to open the Jan 2012 60 Calls for $15.9
Sell to open the Aug 75 Call for $1.85
Again we are doing this 1 to 1 given the fact that we are expecting a slight pullback form the runup of today!
8/19/2011
Letting the Aug call expire worthless. We take in $1.85.
8/29/2011
MOS
Since we collected the full amount of the premium from our previous sale of the Aug 75 calls for $1.85, we now have a profit in the MOS position.
For those of you that want to lock it in, you can sell the Jan 60 calls out.
We are choosing to sell some more premium against these long calls. There are multiple angles to take on this one because there are many thoughts and choices to make. We will try to highlight a few of them:
Our first choice is to sell the $72.5 strike as it represents the current at the money with the stock currently trading at $72.03.
We can sell these with a premium of $2.25. This represents selling $74.75 stock if you add the premium to the stock price.
If you compare these to the $75 calls currently trading at $1.21 it does look tempting to sell pure premium, but our thought process is that we want to have some meat to collect when the stock falls back down to support.
If you wanted to be more aggressive you could sell the Sep 70 calls $3.65. This represents selling the ITM Calls right now, but this stock could easily fall back to the $70 level.
Aggressive traders may like to sell the weekly options, but for a stock that is very volatile, there was not enough premium in the weekly options for us at this point.
More aggressive traders can also do this on a ratio, where they only sell 4 while being long 5.
We are going to go with our first choice of selling the $72.5 calls on a 1 to 1 basis. We expect a little more upside but also expect future volatility and want to be able to collect if and when it does fall back down.
Tweeted:
“MOS@$72.03, with our Aug. short calls having expired worthless, we’re selling 5 regular Sept. 72.5 calls @ $2.25 now against our long calls.”
9/2/2010
With the stock opening much lower today at $68.8 we are currently trading at $68.5. WE are going to buy back our short 72.5 calls for $ .8 for a $1.45 profit.
We will look for the stock to test the highs of the day to either add another short against our long or exit the position completely.
The stock is set to close somwhere aound $70, that will put our long Jan 60 Call at $13.7. This is a loss of $2.2 from our long entry of $15.9.
On our short calls we have locked in profit of $1.85 +$1.45 =$3.3.
Net we have taken out $1.1 on 500 shares or $550.
For the original position starting at $73.25 and us taking it off at $70, this is a loss of $3.25. Regular long stock holders would have lost $1,625 on their 500 shares. We managed to pull out a gain of $550 or 7.8% on a slight loser of a position.
We consider that a win and live to play another day