PeakTrader.com

[arthur]

LU may rise on contract awards from 3 1/4 to over 6, or if it doesn't receive them, it may fall to 2 1/2. If the market senses news soon, then LU may rise sharply before the news. Consequently, that may be an opportunity to sell some calls, or buy more puts. The LU Apr 4 calls may be bought at 0.15 and the Apr 4 puts may be bought at 0.85. Perhaps, for every 100 calls bought, 10 puts should be bought. So, potential return is very high and risk is very low. To further lower risk, the Apr options should be held no later than Nov 30th, because time value decay accelerates closer to expiration. If the big move isn't made, either way, by Nov 30th, then the Apr options should be sold, and Jan 4 '07 options should be bought, if the big move is still possible. It may be best to gradually shift from the Apr options into the '07 options starting in mid-Nov, when there are opportunities to take advantage of volatility.