This is a neutral to bullish assumption "skip month" call diagonal that very nearly approaches the metrics of a "proper" Poor Man's Covered Call where the credit received for the short call is equal to or greater than the extrinsic in the long option, the break even on setup is at or below where the stock is trading, and where the price paid is less than 75% of the width of the spread.
Currently, the setup is bid 1.33/mid 1.40/ask 1.47. Spot sits at 14.31 with a mid price fill yielding a break even of 14.40 (.09 above where the underlying is trading), a potential max profit (assuming no rolls) of .60/contract, and a price/spread width ratio of 70%.
Alternatively, you can widen the setup to a 12/15 to relieve yourself of additional extrinsic in the long such that the credit received on the short call end of the stick exceeds what's in the long. The 12/15's currently bid 2.15/mid 2.20/ask 2.25, a mid price fill would yield a break even of 14.20 (.11 below where the stock is trading), a max profit of .80, and a price/spread width ratio of 73.3%.
I'd look to take profit at 20% of what you put these setups on for, which would yield a .28 profit for the 13/15 (20% ROC), .44 for the 12/15 (20% ROC), keeping in mind that earnings come out in 35 ... .
Notes: We're kind of in between where the April monthly is too near in time and the May monthly -- too far out -- for setups, but I'm willing to roll the dice on a cheap setup on the notion that there might be some speculative bullish interest in this beaten down stock running into earnings, particularly since it's trundled down further from where it was a few weeks ago on an analyst downgrade. Neither setup requires a particularly huge amount of upward movement, particularly if you're shooting for 20% versus max profit (which would basically require a finish above the 15 shortie).
Currently, the setup is bid 1.33/mid 1.40/ask 1.47. Spot sits at 14.31 with a mid price fill yielding a break even of 14.40 (.09 above where the underlying is trading), a potential max profit (assuming no rolls) of .60/contract, and a price/spread width ratio of 70%.
Alternatively, you can widen the setup to a 12/15 to relieve yourself of additional extrinsic in the long such that the credit received on the short call end of the stick exceeds what's in the long. The 12/15's currently bid 2.15/mid 2.20/ask 2.25, a mid price fill would yield a break even of 14.20 (.11 below where the stock is trading), a max profit of .80, and a price/spread width ratio of 73.3%.
I'd look to take profit at 20% of what you put these setups on for, which would yield a .28 profit for the 13/15 (20% ROC), .44 for the 12/15 (20% ROC), keeping in mind that earnings come out in 35 ... .
Notes: We're kind of in between where the April monthly is too near in time and the May monthly -- too far out -- for setups, but I'm willing to roll the dice on a cheap setup on the notion that there might be some speculative bullish interest in this beaten down stock running into earnings, particularly since it's trundled down further from where it was a few weeks ago on an analyst downgrade. Neither setup requires a particularly huge amount of upward movement, particularly if you're shooting for 20% versus max profit (which would basically require a finish above the 15 shortie).
