A speculative credit spread trade on a drug company

You know that I am all about conservative option trading and I usually do not promote speculative credit spread trades, but this one from Brent Archer makes sense.

Novartis (NVS) gets Diovan approval in Canada

Most of the time I like to trade with the direction of the stock. For example if a stock is going up I will tend to play a bull put spread, if the stock is going down I will tend to play a bear call spread. One rule is that you should never try and predict the top or bottom of a stock, so it is always better to confirm a direction and trade in the direction of the stock.

There are exceptions and in this case Brent has a good explanation as to why we can try and predict a bottom to this bearish stock and why we should play a May bull-put credit spread below the $45 range. Also take heed of his earnings warning.

credit spread, Diovan, Novartis, option trading

Iron Condor the use of two credit spreads

An iron condor is an option strategy that uses two credit spreads a bull put spread and a bear call spread. This type of strategy is more of a neutral position, because you place the trade above and below the actual stock/index price and your thought process is that the stock will not rise above your sold option of the bear call spread and will not go below the sold option of the Bull Put spread. It is a very cool strategy because you will always be correct on at least one of the positions.

If you want to learn more about how to use this very popular credit spread strategy you need to check out Condor Options I have found their blog and ideas very insightful and useful.

More from the Web on Iron Condors….
RUT (Russell 2000 Index) Iron Condor
Hedging Ideas for Iron Condors, Part 1 
Real-World Trading: The Iron Condor, Part II
Options Stratergies - The Iron Condor And The Long Condor
Condor Options: Iron Condor Options Newsletter
Optionetics - Iron Condors part 1

condor options, credit spreads, iron condor

A technical trade on SOV using a credit spread

Technical traders use patterns they see in charts to time and trade stocks and options. The Stock Market Cookbook explains a trade on Sovereign Bancorp (SOV) using an inverse head and shoulders pattern - don’t know what that means check it out here —>
Sovereign Bank- An Inverse Head & Shoulders Pattern in the Making?

Dr. Kris, the blogger at The Stock Market Cookbook,  is looking at a bull put credit spread  April or May 15/12.5 to offset the straight calls that were also recommended.

bull put credit spread, credit spread, technical trader

Trading the news on GlaxoSmithKline

Our friends at Market Intelligence Center have an opinion on GlaxoSmithKline after the news that the Food & Drug Administration requested more information from the company about its asthma drugs.

Technically the stock is bearish and with this news it is primed for a bear call credit spread. Market Intelligence Center is suggesting an August Bear-Call credit spread above the $50. For more details on this check out their post - GlaxoSmithKline (GSK) NewsBite - FDA Requests Data on GlaxoSmithKline Asthma Drugs

This in my opinion is the correct way to trade on the news - using the news to confirm a position is going in the direction you believe the stock is going. However, trading the news such as bad news on a high flying stock can make a good amount of money but it is much more speculative and can really hurt if it goes the wrong way. I much prefer a more conservative approach and using the news to confirm vs speculate is the method I prefer.

credit spread, GSK, news, trading the news

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