Monday, March 7, 2011

Trade of the Day: SanDisk Corporation July $45/60 bear call spread

The Trade
A trader sold 2,000 July $45 calls at $6.40 and bought 2,000 July $60 calls $1.32 for a credit of $5.08 or $1,016,000.

As you can see from the graph above, the spread profits from a decrease in the underlying stock at expiration. The bear call spread has limited risk and limited profit potential at expiration. The max risk is $1,984,000, which would occur at an underlying price of $60 or more at expiration. The max profit potential is the credit, which would occur at an underlying price of $45 or less at expiration. The break even underlying price at expiration is $50.08.

The line shown is the upper break even price at expiration. The 52-week range for SNKD is a low of $31.82 and a high of $53.60. SNDK traded 39,388 contracts today compared to average volume of 27,749.

SanDisk Corporation is engaged in designing, developing and manufacturing data storage solutions in a range of form factors using the flash memory, controller and firmware technologies. The solutions include removable cards, embedded products, universal serial bus drives, digital media players, wafers and components. Today, SanDisk announced the release of the world's largest CompactFlash Card. The 128GB SanDisk Extreme Pro CompactFlash will be available in the first quarter of this year, and costs $1,499.

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