Stock / Symbol: [private_monthly]Aruba Networks / ARUN[/private_monthly]
Price at trade opening: $22.79
Price at trade adjustment: $22.73
Option Strategy: call back spread
Max Risk: $540 (at Jan expiration)
Max Reward: unlimited
Profit Range: $27.70 + (at Jan expiration)
Current Profit/Loss: ($118)
Proposed New Option Strategy: bull put spread
Reasoning: We didn't get our expected big pop in the stock when they reported earnings on November 17th. With the break even on January expiration at $27.70 (22% higher than it's current price), we're going to close out the call back spread for a $118 loss and then open up a bull put spread. The new trade configuration lowers our break even down to $20.40 and gives us the full profit potential at any price over $21, meaning that the stock can drop another 7.6% and we'll still make the max return of $120 or 20%.
Trade Details:[private_monthly]
BTC -2 ARUN Jan11 22.5 Call @ $1.75
STC 4 ARUN Jan11 25 Call @ $0.75
for a net debit of $0.25
then
BTO (Buy) 2 ARUN Jan11 17.5 Put @ $0.20 = $40.00
STO (Sell) -2 ARUN Jan11 21 Put @ $0.80 =($160.00)
for a net credit of $0.60
Requirements:
Cost/Proceeds ($120.00) Credit
Option Requirement $700.00
Total Requirements $580.00
Estimated Commission $12.95
[/private_monthly]
Revised Option Strategy: bull put spread
Max Risk: $580 (at Jan expiration)
Max Reward: $120
Profit Range: $20.40 + (at Jan expiration)
Max Profit: $21 +
Chart:[private_monthly]
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