WBC
Okay, today I Opened a WBC. Firstly the reason why this trade looks so good is because WBC is actually paying 63c dividend sometime this month. (so don’t be fooled) Bank stocks don’t usually pay such good premium so far out of the money…
So here is the reason why I entered this trade, looking at the charts its a very technically strong stock. There is plenty of support and WBC is actually blue sky (ie. all time high). Remember we are also expecting a 63c drop during the month and must take this into consideration. That being said, From the chart I think there is plenty of support to hold WBC up after the ex dividend.
Also, interest rates did not rise this month, so its good new for everybody. I also want to diversify my holdings, and I like banks, they always make money, especially big monsters such as WBC.
The Trade (WBC)
Sell May $26.5 Puts @ $0.265
Buy May $26.0 Puts @ $0.115
Expiry = 24/05/2007
Share/Contract = 1000
Max Profit = 0.15 (0.265-0.115)
Max Risk = 0.35 [(26.5-26.0) - (0.265-0.115)]
Return on Risk = 42.86%
Breakeven = $26.39
I opened 10 contracts:
Reward for trade (excluding fees) $1,500.0
Reward for trade (including fees) $1,290.6
Value At Risk $3,900.0
The above assumes that on 24th May 2007 WBC will trade at or above $26.5
(WPL closed Friday @ 27.2)
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