Results 1 to 16 of 16

Thread: Walgreens 29% ROI in 5 weeks

  1. #1
    God/dess britneyireland's Avatar
    Joined
    Jan 2002
    Location
    Dallas
    Posts
    2,568
    Thanks
    283
    Thanked 602 Times in 340 Posts
    Blog Entries
    1
    My Mood
    Inspired

    Default Walgreens 29% ROI in 5 weeks

    Diagonal Bull Call Spread

    The Trade
    Sell Feb $27.50 Call $0.60 cents
    Buy March 2009 $20 Call $6.40
    Net Debit is $5.80

    Expectation
    To get called out in Feb or March as stock trades in uptrending channel.
    Potential profit if called out in Feb is $1.70 profit on $5.80 invested or 29%

    Trading Stance: Found - A stock in an uptrending channel and good industry in a somewhat shaky market. So one of the safer ways to play this is to buy the longer deep in the money call (therefore not paying much in time value), then sell the shorter term call just slightly out of the money; giving us room for a growth profit if the stock attains the top of it’s trading range and upper Bollinger band (near $2.

    The first resistance will be our exercise price of $27.50 as it is the 38% retracement of the August to November crash, uh, I mean adjustment. If the stock can continue the steady upward growth then we could easily get called away for a 29% profit the first month. Yet as we all know we must be patient as the stock is trading just as expected hitting higher lows and reaching higher highs but with over four weeks until expiration.





    Profile:
    Walgreen Co. operates a chain of drugstores in the United States. These drugstores sell prescription and non-prescription drugs, and general merchandise. Its general merchandise comprises beauty care, personal care, household items, candy, photofinishing, greeting cards, seasonal items, and convenience food. The company provides its services through drugstore counters, as well as through mail, by telephone, and on the Internet. As of August 31, 2008, Walgreen operated 6,934 locations, which include 6,443 drugstores, 364 worksite facilities, 115 home care facilities, 10 specialty pharmacies, and 2 mail service facilities in 49 states, the District of Columbia, Puerto Rico, and Guam. It also owned 28 strip shopping malls. The company was founded in 1901 and is based in Deerfield, Illinois.

    Disclaimer
    This is published solely for informational purposes and is neither a solicitation nor offer to buy or sell any stock, mutual fund or other security. It does not attempt or claim to be a complete description of the securities, markets, or developments referred to in the material. All expressions of opinion are subject to change without notice. The information is obtained from internal and external sources, which Avalon considers reliable, but Avalon has not independently verified such information and Avalon does not guarantee that it is accurate or complete. Avalon does not undertake to advise anyone. Avalon may from time to time have a position in the securities mentioned and may sell or buy such securities
    Rebecca Avalon







  2. #2
    Veteran Member
    Joined
    Mar 2008
    Posts
    313
    Thanks
    7
    Thanked 391 Times in 91 Posts

    Default Re: Walgreens 29% ROI in 5 weeks

    Awesome, that should help you pay down your student loans!

  3. #3
    Veteran Member person's Avatar
    Joined
    Sep 2007
    Posts
    633
    Thanks
    33
    Thanked 34 Times in 23 Posts

    Default Re: Walgreens 29% ROI in 5 weeks

    Quote Originally Posted by britneyireland View Post
    Diagonal Bull Call Spread

    The Trade
    Sell Feb $27.50 Call $0.60 cents
    Buy March 2009 $20 Call $6.40
    Net Debit is $5.80

    Expectation
    To get called out in Feb or March as stock trades in uptrending channel.
    Potential profit if called out in Feb is $1.70 profit on $5.80 invested or 29%
    "$5.80 invested" just means that if you trade at theoretical then you have paid $5.80 for your initial position. In reality you're paying brokerage and trading away from theoretical, but that's a fixed cost. Thing is, you could lose lots more.

    eg. Say in the short term the stock skyrockets so your short feb calls blow out and become like short stock. Meanwhile March downside vols collapse so you end up short stock and your March calls aren't worth as much as you'd like. Say you get assigned - do you close out everything by crossing bid/ask spreads immediately?
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

  4. #4
    God/dess britneyireland's Avatar
    Joined
    Jan 2002
    Location
    Dallas
    Posts
    2,568
    Thanks
    283
    Thanked 602 Times in 340 Posts
    Blog Entries
    1
    My Mood
    Inspired

    Default Re: Walgreens 29% ROI in 5 weeks

    I got filled at $5.80.

    Whether the stock skyrockets to 100 or if it just closes at 27.51 I will make exactly the same amount: $1.70 When you enter a spread trade your max gain is always the difference between the strikes minus the net debit.

    So what I always do, is whenever I reach my maximum gain, I sell the spread back.
    As long as you roll your trades tuesday or wednesday before expiration day, it's unlikely you will get called out or have the stock put to you.

    Delta always trumps Vega, so if the stock goes to the moon, so will the delta of your option. As delta increases, the effect of volatility decreases.
    Rebecca Avalon







  5. #5
    God/dess britneyireland's Avatar
    Joined
    Jan 2002
    Location
    Dallas
    Posts
    2,568
    Thanks
    283
    Thanked 602 Times in 340 Posts
    Blog Entries
    1
    My Mood
    Inspired

    Default Re: Walgreens 29% ROI in 5 weeks

    So now, one week later, I can sell the spread back for 4.90.

    At this point I've made $90 out of the total possible $170 per contract or 15% ROI.

    I'm going to hold it a bit longer. I only traded one contract, and commissions are $3 in, $3 out at www.thinkorswim.com
    Rebecca Avalon







  6. #6
    Senior Member hustlebunny's Avatar
    Joined
    Nov 2004
    Location
    NEW YORK
    Posts
    192
    Thanks
    2
    Thanked 21 Times in 8 Posts
    My Mood
    Goofy

    Default Re: Walgreens 29% ROI in 5 weeks

    Thanks for starting this! I am interested in learning more. Hopefully, more people will chime in.
    "Whether YOU think you can or YOU think you can't you're right!" -Henry Ford

  7. #7
    God/dess
    Joined
    Dec 2004
    Location
    London, UK
    Posts
    2,218
    Thanks
    5
    Thanked 209 Times in 142 Posts

    Default Re: Walgreens 29% ROI in 5 weeks

    Hi Britney,

    I admit it - I'm both puzzled and curious. I don't understand a word of it, but I'm intrigued.

    Could you post a very simple explanation as to what's going on here.

    Phil.

  8. #8
    God/dess britneyireland's Avatar
    Joined
    Jan 2002
    Location
    Dallas
    Posts
    2,568
    Thanks
    283
    Thanked 602 Times in 340 Posts
    Blog Entries
    1
    My Mood
    Inspired

    Default Re: Walgreens 29% ROI in 5 weeks

    unlike stocks, which have to move a lot if you want to see a a lot profit, options only have to move a very small amount.

    if were to buy stock in walgreens at, say $25, it would have to move $7.50 for me to have a 29% ROI. Thats a lot to ask the stock to do.

    However, with options, the stock only has to move a fraction of that to get the same 29% return.

    Very basically:

    I bought one march 20 call, which says I control 100 shares of WAG stock at a cost basis of $20 per share. It cost me $640 to buy that march call option.

    I sold one Feb 27.50 call, which says I have the obligation to deliver 100 shares of WAG stock at the cost basis of $27.50 if the market makers call me out. I was paid $60 to take on this obligation.

    I entered these trades at the same time. $640 to buy minus the $60 credit is why it cost me $580 to enter this trade.

    The stock has already moved up to the $27.50 level. If I wanted to exit the trade today I could for a $90 profit.
    Rebecca Avalon







  9. #9
    God/dess
    Joined
    Dec 2004
    Location
    London, UK
    Posts
    2,218
    Thanks
    5
    Thanked 209 Times in 142 Posts

    Default Re: Walgreens 29% ROI in 5 weeks

    Thanks - that's a bit clearer.

    And if the stock goes south?

    Phil.

  10. #10
    God/dess britneyireland's Avatar
    Joined
    Jan 2002
    Location
    Dallas
    Posts
    2,568
    Thanks
    283
    Thanked 602 Times in 340 Posts
    Blog Entries
    1
    My Mood
    Inspired

    Default Re: Walgreens 29% ROI in 5 weeks

    if the stock goes south, then like every trade, know your "uncle point" The most we can lose is $580 that we paid for the trade.

    Using technical analysis and Dow Theory (and uptrend is higher highs and higher lows) I would exit the trade for a loss if the green line was broken if/when the stock made a lower low.
    Rebecca Avalon







  11. #11
    God/dess
    Joined
    Dec 2004
    Location
    London, UK
    Posts
    2,218
    Thanks
    5
    Thanked 209 Times in 142 Posts

    Default Re: Walgreens 29% ROI in 5 weeks

    Thanks.

    Phil.

  12. #12
    God/dess britneyireland's Avatar
    Joined
    Jan 2002
    Location
    Dallas
    Posts
    2,568
    Thanks
    283
    Thanked 602 Times in 340 Posts
    Blog Entries
    1
    My Mood
    Inspired

    Default Re: Walgreens 29% ROI in 5 weeks

    Update:

    The stock has been hovering around $27.80 for the past week. I haven't been called out, nor do I expect to be called out until expirations week.

    I have a few choices:
    1. I can sell the spread for $7.00 That is $1.20 profit on $5.80, or a 20.6% ROI so far
    2. I can hang onto it for another few weeks to eek out another $50 to acheive max gain.

    I'm going with option #1. Today is ripe for shorting the market, and I want to use the profit to buy puts on the SPY
    Rebecca Avalon







  13. #13
    Curious Guest
    Joined
    Feb 2009
    Posts
    4
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: Walgreens 29% ROI in 5 weeks

    wow, that's crazy

  14. #14
    God/dess britneyireland's Avatar
    Joined
    Jan 2002
    Location
    Dallas
    Posts
    2,568
    Thanks
    283
    Thanked 602 Times in 340 Posts
    Blog Entries
    1
    My Mood
    Inspired

    Default Re: Walgreens 29% ROI in 5 weeks

    Glad I bought puts on the SPY yesterday

    Purchased two April 94 put contracts for $9.60, with today's drop I can sell them for $12.85

    That is 3.25 profit per contract or a 33% ROI overnight.

    I think we are going lower than 800 on the S&P on this leg down, I will hold
    Rebecca Avalon







  15. #15
    God/dess threlayer's Avatar
    Joined
    Aug 2003
    Location
    Syracuse
    Posts
    5,921
    Thanks
    369
    Thanked 419 Times in 290 Posts
    My Mood
    Fine

    Default Re: Walgreens 29% ROI in 5 weeks

    Using these techniques, about which I don't understand your language (need to read up), how have you done on the past year? Or maybe you have done this less time.

    And how about the bad month of October?
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  16. #16
    God/dess britneyireland's Avatar
    Joined
    Jan 2002
    Location
    Dallas
    Posts
    2,568
    Thanks
    283
    Thanked 602 Times in 340 Posts
    Blog Entries
    1
    My Mood
    Inspired

    Default Re: Walgreens 29% ROI in 5 weeks

    My IRA has oct-tupled since October.

    October was a GREAT month if you selected the proper strategy.
    Rebecca Avalon







Similar Threads

  1. Defining "ROI"
    By rickdugan in forum Shop Talk
    Replies: 1
    Last Post: 12-08-2011, 06:24 PM
  2. Man urinates on cough drops in Walgreens
    By tempest666 in forum The Lounge
    Replies: 0
    Last Post: 04-30-2011, 03:08 AM
  3. 9.9% ROI in 4 weeks on Exxon Mobil
    By britneyireland in forum Dollar Den
    Replies: 1
    Last Post: 02-27-2009, 11:59 AM
  4. February AAPL Trade 14.2% ROI
    By britneyireland in forum Dollar Den
    Replies: 7
    Last Post: 01-18-2009, 12:47 PM
  5. Avalon's Trade idea 12/26 SNP 11.1% ROI
    By britneyireland in forum Dollar Den
    Replies: 1
    Last Post: 01-09-2009, 04:20 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •