NFLD - Options

[Samantha Stephens]

Hi - does anyone know why the December Options have such a high volatility? Seems like there might be a calendar or vertical spread opportunity to be taken advantage of.
Samantha

[Samantha Stephens]

NFLD makes blood replacement to be used when no real blood is available. Seems like a pretty cool alternative... considering. It is supposed to have a longer shelf life than blood, I don't believe it needs refrigeration... so it has some really interesting applications for war and such. And I must say that if this does work, and it can keep the blood bank from calling me every month... I'm behind it 100%! 

BUT it is meeting with a great deal of outcry from the press, which has pointed out that cities included in the test are not required to get approval from their patients. I'm assuming that these patients are unconscious and this is a last ditch alternative. If it's used in hospitals on patients that can reject the use ... and they are not asked... that's gonna be bad. There also may be health related issues ... like deaths... that have come about after it's use, but I'm not sure how anyone will be able to tie the cause and affect ... if the person was dying in the first place. (Seems like a bit of a "Taser" type dilemma ...)

So ... I like the concept. And, I see how it can have it's issues.

The stock is currently trading around the 12.50 strike. And, when I look at the options for December/January, it looks like the options market thinks it's either going up to 15 (or higher) or down to 10 (or lower) over the next 2 months.

The open interest of calls and puts in those 2 months are huge and it seems really split. At the money 12.50 calls and puts in those 2 months have an implied volatility of right around 200. The IVs fall gradually off until Jan09, where the IV is right around 80.

Does anyone know of a reason why it would be compelled to go in either direction over the next 2 months?

Here's my chart analysis.

On the weekly chart, it looks like the long term downtrend has been broken and it is sitting on the new trendline @ 12.50 

On the daily chart, if it can stay above the support @ 12, then it should go back up to resistance level around 15 or 16.


Guide me Landrew!
Samantha

[Samantha Stephens]

NFLD is trading at 13.20. 50 day simple moving average is @ 13.38. I still can't figure out which direction this should go, but if it can get above 13.38, my best guess would be higher. Still no news.

[Samantha Stephens]

NFLD was able to get above 13.38... but it couldn't stay above that level. So, I'm just sitting here ... WAITING FOR SOME NEWS!!!!!

[Samantha Stephens]

OK ... this one continues to perplex me. I've been looking at the option distribution across the strikes calls/puts for December and January. For analysis, I just combined the 2 months.

My burning question is - - Why are people willing to PAY $3 to buy OR sell the stock at $12.50?

From looking at the options below, this is what I've deduced so far...
*There are twice as many calls than PUTS in both the open interest and the volume.
*The PUTS are convinced it's going absolutely no higher than 15.
*The CALLS think it could trade from 7.50 - 30 with unusually heavy Open Interest at  $15, $17.50 ... and $25?? 15 and 17.50 are relatively close to the money. Not sure what to make of the $25 strike.

Does anyone know how I should be interpreting this? The PUTS look organized in their strikes. The Calls are all over the place.


Call Strike   Open        Vol                  Put Strike        Open              Vol
2.5            31            0                     2.5                359                 0
5               611          10                    5                  15,397             140
7.5            4,468       627                  7.5                17,236             253
10             4,002       14                    10                 14,435             205
12.5          9,169       432                  12.5               8,839               189
15            26,653      292                   15                12,347               53
17.5         25,162      254                  17.5               950                   0
20            17,018      280                   20                 833                  10
22.5         15,797       70                   22.5               184                   0
25            27,708       0                      25                690                   0
30            9,681         0                     30                 662                   0
totals:     140,300      1,979                                    71,932               850

Samantha

[riwawi]

Vector Vest rates it a hold right now, but those open interest numbers are amazing at 15 - 20! I wrote calls on this a couple yrs ago and it tanked so I haave stayed away...it looks like they are still burning cash in a big way.

VectorVest Stock Analysis of Northfld Labs as of 11/17/2006

 
This report has five major sections.
  Capital Appreciation Analysis 
  Dividend Analysis
  Price-Volume Data
  Sales / Market Capitalization Information
  Summary


 
The ticker symbol for Northfld Labs is NFLD.  NFLD is traded on the NASDAQ - (xO) and options are available for this stock
 
Business: NORTHFIELD LABORATORIES INC, (NFLD) researches and develops a safe and effective alternative to transfused blood for use in the treatment of acute blood loss. The company's blood substitute product, PolyHeme, is a solution of chemically modified hemoglobin derived from human blood.
Business Sector: NFLD has been assigned to the Drug Business Sector. VectorVest classifies stocks into over 200 Industry Groups and 40 Business Sectors.
Industry Group: NFLD has been assigned to the Drug (Biomedical\Genetic) Industry Group. VectorVest classifies stocks into over 200 Industry Groups and 40 Business Sectors.
 
Capital Appreciation Analysis   Back to top
 
Value: Value is a measure of a stock's current worth.  NFLD has a current Value of $2.24 per share. Therefore, it is overvalued compared to its Price of $13.02 per share.  Value is computed from forecasted earnings per share, forecasted earnings growth, profitability, interest, and inflation rates. Value increases when earnings, earnings growth rate and profitability increase, and when interest and inflation rates decrease. VectorVest advocates the purchase of undervalued stocks. At some point in time, a stock's Price and Value always will converge. 
   
RV (Relative Value): RV is an indicator of long-term price appreciation potential. NFLD has an RV of 0.29, which is very poor on a scale of 0.00 to 2.00. This indicator is far superior to a simple comparison of Price and Value because it is computed from an analysis of projected price appreciation three years out, AAA Corporate Bond Rates, and risk. RV solves the riddle of whether it is preferable to buy High growth, High P/E stocks, or Low growth, Low P/E stocks. VectorVest favors the purchase of stocks with RV ratings above 1.00.
 
RS (Relative Safety): RS is an indicator of risk. NFLD has an RS rating of 0.83, which is poor on a scale of 0.00 to 2.00. RS is computed from an analysis of the consistency and predictability of a company's financial performance, debt to equity ratio, sales volume, business longevity, price volatility and other factors. A stock with an RS rating greater than 1.00 is safer and more predictable than the average stock in the VectorVest database. VectorVest favors the purchase of stocks of companies with consistent, predictable financial performance.
   
RT (Relative Timing): RT is a fast, smart, accurate indicator of a stock's price trend. NFLD has a Relative Timing rating of 1.12, which is good on a scale of 0.00 to 2.00.  RT is computed from an analysis of the direction, magnitude, and dynamics of a stock's price movements over one day, one week, one quarter and one year time periods. Once a stock's price has established a strong trend, it is expected to continue in that trend for the short-term. If a trend dissipates, RT will gravitate toward 1.00. RT will explode from bottoms, dive from tops, and reflect changes in price momentum. VectorVest favors the purchase of stocks with RT ratings above 1.00. 
 
VST (VST-Vector):  VST is the master indicator for ranking every stock in the VectorVest database. NFLD has a VST rating of 0.86, which is fair on a scale of 0.00 to 2.00. VST is computed from the square root of a weighted sum of the squares of RV, RS, and RT. Stocks with the highest VST ratings have the best combinations of Value, Safety and Timing. These are the stocks to own for above average, long-term capital appreciation. VectorVest advocates the purchase of safe, undervalued stocks rising in price. 
 
Recommendation (REC): VectorVest gives a Buy, Sell, Hold recommendation on every stock, every day. NFLD has a Hold recommendation. REC reflects the cumulative effect of all the VectorVest parameters working together. These parameters are designed to help investors buy safe, undervalued stocks rising in price. They also help investors avoid or sell risky, overvalued stocks falling in price. VectorVest recommends that investors buy high VST-Vector, Buy-rated stocks in rising markets. 
 
Stop (Stop-Price): Stop is an indicator of when to sell a long position or cover a short position.  NFLD has a Stop of $12.28 per share. This is $0.74 below NFLD's current closing Price. A stock's Stop is computed from a 13 week moving average of its closing prices, and is fine-tuned according to the stock's fundamentals. High RV, high RS stocks have lower Stops, and low RV, low RS stocks have higher Stops. In the VectorVest system, a stock gets a 'B' or 'H' recommendation if its Price is above its Stop and an 'S' recommendation if its Price is below its Stop.
 
GRT (Earnings Growth Rate): GRT reflects a company's one to three year forecasted earnings growth rate in percent per year. NFLD has a forecasted Earnings Growth Rate of 3.00%, which VectorVest considers to be poor. GRT is computed from historical, current and forecasted earnings data. It is updated each week for every stock in the VectorVest database. GRT often foretells a stock's future price trend. If a stock's GRT trend is upward, the stock's price will likely rise. If GRT is trending downward, the stock's Price will probably fall. VectorVest favors the purchase of stocks whose GRT is rising and is greater than the sum of current inflation and interest rates, (7.07%). 
 
EPS (Earnings per Share):  EPS stands for leading 12 months Earnings Per Share.  NFLD has a forecasted EPS of $-0.75 per share. VectorVest determines this forecast from a combination of recent earnings performance and traditional fiscal and/or calendar year earnings forecasts. 
 
P/E (Price to Earnings Ratio): P/E is a popular measure of stock valuation which shows the dollars required to buy one dollar of earnings.  NFLD has a P/E of -17.36. This ratio may be deemed to be high or low depending upon your frame of reference. The average P/E of all the stocks in the VectorVest database is 27.97. P/E is computed daily using the formula: P/E = Price/EPS. 
 
EY (Earnings Yield): EY reflects earnings per share as a percent of Price. EY is related to P/E via the formula, EY = 100 / (P/E), and may be used in place of P/E as a measure of valuation. EY has the advantages that it is always determinate and can reflect negative earnings. NFLD has an EY of -5.73 percent. This is below the current average of 3.57% for all the stocks in the VectorVest database. EY equals 100 x (EPS/Price). 
 
GPE (Growth to P/E Ratio): GPE is another popular measure of stock valuation. It compares earnings growth rate to P/E ratio. NFLD has a GPE rating of -0.17.  High growth stocks are believed to be able to justify high P/E ratios. A stock is commonly considered to be undervalued when GPE is greater than 1.00 and overvalued when GPE is below 1.00. Unfortunately, this rule of thumb does not take into account the effect of interest rates on P/E ratios. The operative GPE ratio of 1.00 is valid when and only when interest rates equal 10%. With long-term interest rates currently at 5.77%, the operative GPE ratio is 0.33. Therefore, NFLD may be considered to be overvalued. 
 
Dividend Analysis   Back to top
 
DIV (Dividend): VectorVest reports annual, regular, cash dividends as indicated by the most recent payments. Special distributions, one-time payments, stock dividends, etc., are not generally included in DIV. NFLD does not pay a dividend. 
 
DY (Dividend Yield): DY reflects dividend per share as a percent of Price. NFLD does not pay a dividend, so it does not have a Dividend Yield rating. . DY equals 100 x (DIV/Price). It is useful to compare DY with EY. If DY is not significantly lower than EY, the dividend payment may be in jeopardy. 
 
DS (Dividend Safety): DS is an indicator of the assurance that regular cash dividends will be declared and paid at current or at higher rates for the foreseeable future. NFLD does not pay a dividend, so it does not have a Dividend Safety rating . Stocks with DS values above 75 typically have RS values well above 1.00 and EY levels that are much higher than DY.

 
DG (Dividend Growth Rate): Dividend Growth is a subtle yet important indicator of a company's financial performance. It also provides some insight into the board's outlook on the company's ability to increase earnings. NFLD does not pay a dividend, so it does not have a Dividend Growth rating . 
 
YSG (YSG-Vector): YSG is an indicator which combines DIV, DY and DG into a single value, and allows direct comparison of all dividend-paying stocks in the database. NFLD does not pay a dividend, so it does not have a YSG rating . Stocks with the highest YSG values have the best combinations of Dividend Yield, Safety and Growth. These are the stocks to buy for above average current income and long-term growth. 
 
Price-Volume Data   Back to top
 
Price: NFLD closed on 11/17/2006 at $13.02 per share 
 
Open: NFLD opened trading at a price of $13.37 per share on 11/17/2006.
 
High: NFLD traded at a High price of $13.40 per share on 11/17/2006.
 
Low: NFLD traded at a Low price of $12.90 per share on 11/17/2006
 
Close: NFLD closed trading at price $13.02 per share on 11/17/2006. (Close is also called Price in the VectorVest system)
 
Range: Range reflects the difference between the High and Low prices for the day. NFLD traded with a range of $0.50 per share on 11/17/2006. 
 
$Change: NFLD closed down 0.16 from the prior day's closing Price. 
 
%PRC: NFLD's Price changed -1.21% from the prior day's closing price.
 
Volume: NFLD traded 558,681 shares on 11/17/2006.
 
AvgVol: AvgVol is the 50 day moving average of daily volume as computed by VectorVest. NFLD has an AvgVol of 406,700 shares traded per day.
 
%Vol: %Vol reflects the percent change in today's trading volume as compared to the AvgVol. %Vol equals ((Volume - AvgVol) / AvgVol ) * 100.  NFLD had a %Vol of 37.37% on 11/17/2006
 
CI (Comfort Index): CI is an indicator which reflects a stock's ability to resist severe and/or lengthy price declines. NFLD has a CI rating of 0.74, which is poor on a scale of 0.00 to 2.00. CI is quite different from RS in that it is based solely upon a stock's long-term price history. VectorVest advocates the purchase of high CI stocks. 
 
Sales / Market Capitalization Information   Back to top
 
Sales: NFLD has annual sales of $
 
Sales Growth: Sales Growth is the Sales Growth Rate in percent over the last 12 months. NFLD has a Sales Growth of 14.00% per year. This is good. Sales Growth is updated each week for every stock. It is often useful to compare Sales Growth to Earnings Growth to gain an insight into a company's operations. 
 
Sales Per Share (SPS): NFLD has annual sales of $0.00 per share. SPS can be used as a measure of valuation when comparing stocks within an Industry Group. 
 
Price to Sales Ratio (P/S): NFLD has a P/S of 0.00. This ratio is also used as a measure of valuation. Here, too, it is useful when comparing stocks within an Industry Group.
 
Shares: NFLD has 26,000,000 shares of stock outstanding.
 
Market Capitalization: NFLD has a Market Capitalization of $348,000,000. Market Capitalization is calculated by multiplying price times shares outstanding.
 
Summary   Back to top
 
NFLD is overvalued compared to its Price of $13.02 per share, has somewhat below average safety, and is currently rated a Hold.
 
The basic strategy of VectorVest is to buy Low risk, High reward stocks. We suggest that Prudent investors buy enough High Relative Value, High Relative Safety stocks to keep the overall RV and RS ratings of their portfolios above 1.00. As you do this, you'll find that your risk will go down and your investment performance will improve.
 
Rich

[Samantha Stephens]

Thanks for that! That's very cool. I'll have to add that site to my list of resources. Vector Vest is really thorough ... doesn't like this stock in the slightest. I need to figure out how I can incorporate all of that information. These seem like two key tidbits:

NFLD has a current Value of $2.24 per share.
NFLD has a Stop of $12.28 per share - (as of Friday, that's exactly where my daily support line is drawn...hu...)

I just listened to the conference call they had on Nov 7th/8th with Cowan and company. I think the reason for the high volatility in those options is because they have yet to provide details about their Phase III trial Top Line Data ... which is due out Q406 ... and that should be any time now until the end of the year. With that kind of announcement pending ... the options in Dec/Jan really should be high. If this is their only product, that announcement should make or break the company.

After they post those findings, they'll need to prepare/submit their study report in the first half of 07. Explains why those options are also expensive compared to Jan09 Leaps.

They reported their last earnings on 10/10/06 and the stock has fallen off ever since. If they report on time, then they should report again on or around 1/10/07.

I wonder how the quiet period for earnings works when you have major announcements like trial data and such...

Anyway - a couple things I thought were interesting from the call
*They have the building that will take them from 10K pints to 100K pints/yr
*They calculate US demand to be between 400-500K pints per year ... which would be their next level of expansion ... and that would essentially give them a monopoly, near term, if they could meet demand. Right?
*The burden of proof in their study seems pretty low to me. The don't have to prove "superiority" to blood ... though if they could I'm sure the stock would go nuts. They just have to prove "noninferiority".

I think this one is boiling down to ... no guts no glory. Everything to make those options go one way or the other will happen in the next couple months. If I can't figure out a way to take advantage of the volatility skew soon, that opportunity will dissappear. I need a crystal ball...

[ScottishTrader]

hey samantha,

Just wanted to say that it is nice to have a new member on here actively contirbuting with new picks, as well as a different way of looking at things!  Hope you stick around and learn a lot, as I think we all have!  Not too sure about NFLD, particularly re: their option prices etc, as I don't ply options.

However I do like that bounce at the base of the channel, and am kicking myself that I didn't se your thread earlier, as it looks to be a clear bounce from support.  A call (or long) strategy looking to sell near the top of the channel may be worthwhile, though obviously if you aen't in now, a fair bit of that has already been made.

Anyway, I'll have a closer look at this this weekend, when I have more time.

ST

[Samantha Stephens]

Hi ST!
It's nice to be here. I've learned so much already about charting. I thought I was pretty "technical" ... but you people wave flags, banners, triangles and draw all sorts of lines... and I have no clue. Time to pull out the books and brush up!

I think NFLD might be a good interday trade ...in the channel. But I'm not so sure I'd be able to sleep if I held it over night... I have this sinking feeling it's going to be one of those stocks that you buy and then wake up the next day and it's either really high or really low. OR ... worse yet.... one of those stocks that gets halted. God I hate it when they halt stocks... it's just such a helpless feeling and you're wide awake when it happens. Like a trip to the dentist without pain killer Any insight you might have to push me in one direction or the other would be awesome.

I like looking at the options because they usually give an indication of what people think is going to happen. People in the present are buying the future direction. And ... if they're cheep, they can sometimes make big stocks feel like penny stocks.

I just wish that when they bought or sold the options, they had to log their reasoning. Like ... "I'm buying calls cause I think this is going to the moon ... OR... I'm buying calls to protect me from an upside surprise, cause I think this stock is going to hell in a handbasket so I'm planning to short the stock to zero!!!!" Now THAT would be REALLY helpful information. hahahHAHAHAHAH!!!

Samantha

[Samantha Stephens]

OH ... and one more thing that the options do is help create resistance and support right around the strike prices. If there's a TON of options at like the $12.50 strike, the stock should have a hard time getting through that level.

As the stock rises to that level, then everyone who sold naked puts will either need to cover their puts or sell the stock so they are ready to take delivery if they get exercised. AND If the stock can break through that level, then everyone who sold naked calls will either need to cover their calls or buy the stock so they can deliver if they're exercised.

So you get sort of nasty bump on the head at resistance on the way up and if it makes it through, you can get a quick run up and then that strike can help provide support.

And ... as you get close to expiration, those options have a tendency to pull the stock towards a near by strike and peg it there until expiration.

I think it's cool ... even if you never trade options...
-Samantha

[Samantha Stephens]

OK ... so I've run the numbers with Friday's figures... against all the Option strategies that I "understand". I came up with 2 ideas.

The first idea: A good strategy MIGHT be to do a Long PUT Butterfly:

The options are in December - they will expire at the close on December 15th.
You risk $240 to make at most $260.
You start losing money if the stock goes above $15.10 OR below $9.90
Between $9.90 & $15.10 you'll have a profit - that's a pretty big window ... but like I mention below, announcements could really throw this stock for a loop.
Greatest profit is achieved if the stock price at the December expiration is exactly $12.50

At expiration, either the calls will be worthless or the puts will be worthless. If the stock is exactly $12.50, all the options will expire worthless ... that would be the best of all worlds. You would get to keep all of your net credit from the transaction.

OK ... so you could probably daytrade around that $12.50 strike to hedge ... but boy you'd have to really be careful doing that. You'd leave yourself open to all sorts of normal shorting issues. For example ... Let's say the stock is falling and you sell it at $12.50 ... then you go off to beddy bye ... wake up the next morning and the stock is at $60. You're butterfly isn't going to help you get out of that mess. You'll have sold at $12.50 and have to buy back at $60 ... and the butterfly will also be in the losing zone ... so you're out another $240. That would be BAD BAD BAD!!!! And ... there's always the possibility they can halt the stock mid day. Those are so painful. So, if you choose to use this strategy.... its  robably best to just put on the trade and let it do it's thing.

I would try to close the leg of the Butterfly that is in the money, prior to expiration, so you don't have to deal with being exercised and let the losing half expire worthless.

-Samantha

[Samantha Stephens]

Here's the second idea: A good strategy MIGHT be to do a Long Iron Butterfly:

The options are in January07- they will expire at the close on January 19th 2007
You risk $65 to make at most $185.
You start losing money if the stock goes above $16.85 OR below $8.15
Between $8.15 & $16.85 you'll have a profit - that's a bigger window than you get with the Long Put Butterfly ... but like I mention below, announcements could really throw this stock for a loop.
Greatest profit is achieved if the stock price at the January expiration is between $10 and $15.

With this strategy, at expiration, the calls can be worthless or the puts can be worthless. If the stock is between $10 and $15 all the options will expire worthless ... that would be the best of all worlds. You would get to keep all of your net credit from the transaction.

Here again ... you could probably daytrade around that $10 and $15 strikes to hedge ... but you'd have to really be careful doing that. You'd leave yourself open to all sorts of normal shorting issues. For example ... Let's say the stock is falling and you sell it at $10 ... then you shut off your computer... call it a week ... come back on Monday and the stock is at $60. You're butterfly isn't going to help you get out of that mess. You'll have sold the stock at $10 and have to buy back at $60 ... and the butterfly will also be in the losing zone ... so you're out another $65. That would be SAD SAD SAD!!!! And ... there's always the possibility they can halt the stock mid day. Those are so painful. So, if you choose to use this strategy.... its  robably best to just put on the trade and let it do it's thing.

My exit strategy for this trade would be to try and let both legs expire worthless if the stock is trading between $10 and $15. But if it's over $15, I'd close that leg and let the other leg expire. If it's trading below $10, I'd close that leg and let the other leg expire worthless.

The reason I like this strategy more than the one below, is that $10 - $15 is a nice BIG window. And, I like the risk reward ratio better. I don't like the fact that this trade goes all the way out to January ... because I'm convinced news will happen in the next 2 months. Maybe, if the volatilities drop, it would be best to take the trade off as soon as there is a decent profit.

OK ... those are my ideas ... anyone have anything better??

-Samantha

[ScottishTrader]

Hey samantha,

To be honest, I don't think you will find very many people here who are utilising options in their trades (or at least discussing them on 3sof - although I know that Leira trades mostly options - you could PM her).  Mostly this sight generally tends to side with plain old stock trading.

So as far as options strategies, unfortunately I can be of no use.  However I did say that I would have a lok at the charts for NFLD, so I'll giev you my perspective on them if you want.

The 1 year daily chart is [pretty interesting really, and you cna see that since April, NFLD has developed a pretty wide ascending channel, with sharp rallies and slightly more orderly pullbacks to support.  The rallies have been real rippers, but surprising have not been combined with massively increased volume.  The pullbacks have generally formed falling wedges which have consolidated and then broke to the upside.  NFLD jsut broke out of one of those last week.  Things to note: the CCI does a fairly good job of tagging those reversals and we just got one when it went back down to 12.  There seems to be definite resistance at 13.50 which it will have to get through to continue its bullish charge.  However, unless things go real bad and we get a channel breakdown, I don't see it going below $12 in the next month or two.

The 3 year weekly chart puts all this into context.  We can see that there is significant resistance just over $15 which was the recent high in October.  It will need a LOT of oomph to get through that, but if it does it is in real breakout territory.  I am not sure how it will react when it gets to this level, but right now I am fairly confident that it should retest this level in the near future, now that it has pulled back and tested the channel.  Also there is a trendline from the symmetrical trinagle breakdown in 2005 which looks valid as coninuing resistance on this weekly chat.  The price broke through this level this week, but subsequently sold of and cclosed the week right on this level.  I would think a failure at $13 may push it back down to channel support.

Personally, I like the chart, I like the channel formation (but we really don't know how long the channel will stay valid) and I think a buy as close to 12.50 as possible would be a pretty safe trade, with a stop just below $12.  I would like it a whole lot better if it then went on one of its tears and took out $15 resistance.  As far as options, I would think if you can get a good deal on those 12.50 calls, they would stand a pretty high chance of being in the money next month.  I would maybe be a bit careful with the butterfly thingies (I really have no idea bout options...) as NFLD does have the cpapability to go on a tear, although I doubt it would produce a monster gap on you.

Anyway, hope this helps, I'll be keeping an eye on this one 
ST

[ScottishTrader]

Edit:  Oops, I didn't realise that you had posted this on the options board - apologies!

[Samantha Stephens]

ST - You are awesome! Thank you so much for looking this over as you promised!!!!!

As a new "regular" ...   I still feel so much like a newbie... I'm absolutely thrilled when any of you Smart guys comment on my posts. Call me crazy ... or blond... hahahahahHAHAHAH  It's a ton of pressure to be new!!!!!!!!!!!!

I hope I didn't confuse the issue by making the strategy suggestions below. My first post seemed like a problem finder and I want to be a problem solver. I wanted to make sure you had some idea of what I was thinking, so you would have something to work with and could look at the method behind my madness before you commented.

How was I to know ... that you've never seen a butterfly.  hahahHAHAHAHAHA
In short? Buy the wings and sell the body. I'm trying to capture/sell the volatility skew that I'm seeing in the near month.

What I would love to do is find a decent/free diagonal/calendar spread that would let me sell the current month and buy the Leap @ even. These options are so out of whack that I just can't make that happen.

You're right that if I could get a good deal on the $12.50 options I should get them - I totally agree. BUT ... compared to the future Jan09s ... they are so EXPENSIVE.  Near term... I think anyone who buys the $12.50 options are wasting their money. I'd rather buy the stock. If you buy the 12.50 calls... your break even isn't until 15 ish and if you buy the puts, your break even isn't until 8.50 ish. No thank you!

OH ... and you should have seen me come absolutely unglued on Friday! Schwab posted a trade of like 1.2K options at the 2.5 Dec call strike. And I'm screaming - - "WHO THE HELL WOULD BUY THOSE??? .... IS THERE SOME RIDICULOUS STRATEGY I DON'T KNOW ABOUT?? IF THE STOCK GOES TO 2.5 I LOSE ALL MY MONEY AND IF IT GOES TO 13 I MAKE A PIDDLY AMOUNT THAT'S NOT WORTH MY RISK!!!!" ... then I went out to CBOE and the order must have been canceled or reversed. Thank GOD because Darwin was knockin' on that guy's door!

I think this is a good stock channel trade, but my focus was in the option skew, so I posted it in the options folder. I guess my hope was to have one of my Options ideas promoted from sub (option) idea ... to main (stock picking) idea. ... or ... dare I say ... 3sof pick!!!!

Very sad that you all are so focused on the stocks and not the options.  hahahahahHAHAHAHA

I just know there are more Options investors out there. We hide in the woodwork. If we can get some good ideas about direction going in that folder ... all you stock traders just might find some intersting picks...  It isn't a zero sum game. I think we can all win with a good pick.

So, if you think the low support should be around 12 and the high around 13.50 with serious resistance around $15, then maybe the stock traders will feel fine in that range and I feel better about BOTH of the strategies I've provided below. I'm still partial to the Long Iron Butterfly strategy. It has a bigger window of profit and more time to adjust the trade.

Keep an eye on me ... I know I'm dangerous!
-Samantha