Stock Symbol: [private_monthly]CSTR[/private_monthly]
Option Strategy: diagonal call spread
Max Risk: $580
Max Reward: $361 (at Nov expiration)
Profit Range: $44.32 + (at Nov expiration)
Max Profit at: $50
Reasoning:Expect that [private_monthly]Coinstar - CSTR[/private_monthly] will move up to at least $50 by the end of this year. This diagonal call spread yields us an uncalled return of 20.55% and a called return as high as 62%. Break even on this trade is at $44.32, which is actually lower than its current level. If this stock trades lower than $50 after November expiration, we'll look to sell another near term call for another 10 - 20% yield.
Trade Details:[private_monthly]
Sell -1 CSTR NOV10 50 CALL $1.60 ($160.00) Credit
Buy 1 CSTR APR11 45 CALL $7.40 $740.00
Requirements:
Cost/Proceeds $580.00 Debit
Option Requirement $0.00
Total Requirements $580.00
Estimated Commission $12.95
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Chart:[private_monthly]
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