Anadarko Petroleum Corporation (APC)

[leemalone2k3]

Gonna try some puts and also sell a July Bear Call Vertical credit spread to help finance the puts tomorrow.


Here's my strategy.
Buy July 35 puts 1.31

Buy July 45 call 2.26
Sell July 42.50 call 3.29
This will give you a credit of 1.03 in your account and is the max gain you can get if APC closes below 42.50 on expiration.
Max loss is 1.47 if APC closes above 45 on expiration.
Your breakeven on this spread is 43.53 so you have some room for upward movement on APC before you even lose money.
You offset the cost of the puts to .28 if APC closes below 42.50

Theres only a 28% probability that the 35 puts will expire in the money, but there is a 52% probability that APC will touch 35 before expiration.


If you want to buy puts further out subtract 1.03 from the price you pay for the puts to determine your offset cost.