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Archive for July 10th, 2011

Deep OTM NP Strategy – July Week 1

Posted by mounddweller on July 10, 2011

Fellow Traders,

Below is our list of possible selections for the Deep OTM NP Strategy this last week prior to July expiration.

Two stocks on our list caught my eye.  First, was the Indian IT outsourcing company, Infosys (INFY).  The $60 strike price is below recent support levels and offers over 11% of DSP.  However, two things keep me from recommending this as a possible trade.  One, the company will report earnings on Tuesday, July 12.  Two, the $60 strike price is above the $52-wk low of $56.73.  If the economy were on solid footing I might be willing to take a chance with INFY.  But with things as they are right now, I don’t think it’s worth the risk.

The second possible trade that caught my eye was RBCN.  RBCN sports solid fundaments with over $3.80 in cash and no debt.  It also trades at less than 9x current earnings and 7x future earnings.  The $15 strike is below the 52-wk low of $15.51.  However, with only one week to expiration the premium on the $15 is only $0.10.  Thus, I would have to be willing to pony up $15K in capital to get a minimum of $100 in premium (before commissions).  I’m not willing to do that on a small-cap ($390M) like RBCN.  If RBCN shows up on our screen next week for AUG expirations I may give it a more serious look.



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