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Author: otagoodcar Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 214  
Subject: WESTERN UNION OPTION STRANGLE Date: 1/19/2013 2:26 PM
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I see that there hasn't been any posts on Western Union in awhile and I wanted to see if there was any opinion on it out there on the stock and the options. Specifically I'm looking at a strangle for either May 13 or August 13. WU is currently trading around $13.40 a share so I was thinking the $13 puts and the $14 calls for these two months. May was .58c/.71p at last trade, and August is .79c/1.05p at last trade. I would be interested in hearing any thoughts on this.

Thanks,

DC
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Author: IlanBigfoot Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 196 of 214
Subject: Re: WESTERN UNION OPTION STRANGLE Date: 1/29/2013 3:29 AM
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I'm glad to give my 2¢.

A long strangle profits from fast motion in either direction. For example, the August trade would only be profitable if the stock fell below $11.16 or rose above $15.84 (plus fees) before August 16th. You also miss out on the dividend.

Are you neutral on WU, or bullish? I personally don't see much chance of profiting to the downside with WU falling below $11.16. At that point classic value measures like yield (~4.5%) and P/E (~5.5!) would be very attractive.

I have bought the "straight" stock for the dividend and profit to the upside. You may consider forgoing the dividend and buying just the August call, making the trade profitable above $15.05 (plus fees). I believe it likely WU will go up 7.1% in 7 months.

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Author: titans8904 CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 197 of 214
Subject: Re: WESTERN UNION OPTION STRANGLE Date: 2/1/2013 2:32 PM
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Options-wise, the Jan 2015 calls look cheap if you're bullish on the company. I'd be interested in buying calls if the stock ever drifts down close to $10-$11.

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Author: Bluemarathon Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 198 of 214
Subject: Re: WESTERN UNION OPTION STRANGLE Date: 2/19/2013 1:16 PM
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I am intrigued by your precision. 7.1% in 7 months?

Why not 5 - 9% in 6 - 8 months?

I think I might learn something from your answer. I am currently carefully reviewing WU, and thinking about taking a posiiion -- always an anxiety / worry producing situation for me...

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Author: IlanBigfoot Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 199 of 214
Subject: Re: WESTERN UNION OPTION STRANGLE Date: 2/20/2013 4:02 PM
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Don't let my "precision" fool you. I should have said at least 7.1%. The 7.1% increase is just $15.05/$14.05 (price at time of post, and not far from now!) With 6 more months to go, the bet looks good so far.

Why not 5 - 9% in 6 - 8 months? That range sounds fair.

Well, I think the stock is undervalued significantly. But even so, stocks on average go up about 10% a year, so even an overvalued stock can drift 7% in 7 months.

Some other 'guesses': the industry and S&P500 are now averaging a P/E of 16. WU is 10, and earnings are predicted to grow about 10% per year. That would suggest WU could rise quite a lot to "catch up" to the industry's valuation, but even so, could be expected to rise in price by 10% in a year just to maintain a P/E of 10. In other words, if the stock stays a current price, next year's P/E will shrink to 9.1, then 8.2, etc...

A few different valuation models put WU at $18-20 per share, a 25%-30% discount. If it takes three years to reach $20, that's 12% a year, or 1% a month. etc. etc.

That's my opinion, what's yours?

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Author: IlanBigfoot Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 200 of 214
Subject: Re: WESTERN UNION OPTION STRANGLE Date: 5/4/2013 4:57 AM
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1/19/2013:
WU is currently trading around $13.40 a share so I was thinking the $13 puts and the $14 calls for these two months. May was .58c/.71p at last trade, and August is .79c/1.05p at last trade.


WU has had a nice spike up the past few days, and is now at $15.64. I thought it would be worth a quick review.

The May strangle with strikes of $14 call/$13 put and initial price of .58c/.71p is now at $1.65c/$0p. Initial outlay of $1.29 is now worth $1.65, or up 27.9% (not including fees, taxes, and Maalox)

August strangle, same strikes bought for .79c/1.05p, is now at $1.85c/.15p. Initial outlay of $1.84 now worth $2.00, or up 8.6% (niftM)

Compare these to the underlying stock itself:

Jan 22, 2013 Open 13.46
Mar 13, 2013 0.125 Dividend
May 3, 2013 Close 15.64


(15.64+.125)/13.46 - 1 = 17.1% return

and the market (aka the EFT SPY) has returned 161.37/148.47 = 8.7%

Straight May calls was the one to do: $1.65/.58 = 184% profit, but then hindsight's 20/20, ain't it?

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