4 Stocks Under $10 Making Big Moves
05.30.12 | 03:01 PM
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Barron's: Option Plays on Stocks
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07.14.07Views:
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From Barron's 7-16-07:"The options market lets the adventurous play the mergers and acquisitions game by selling puts on buyout targets.
A put seller takes the view that a stock is going to remain above a certain price -- the option's strike price -- until after the option expires. But put-selling comes with a big risk: If the underlying stock falls, put sellers have to buy it and could wind up being forced to overpay.
Goldman Sachs options strategist John Marshall last week screened for companies on which options are either overestimating or underestimating the size of a post-earnings-report stock move. Because the estimation of a coming stock move is a key part of option prices, traders who think there's no good reason for the discrepancy can profit by either buying or selling options.
There are a few standouts.
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