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



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