In article, “CME Buying CBOT”, we analyzed Chicago Mercantile Exchange’s (CME) purchase of CBOT (BOT), and in article, “CME Bull Put Spreads Strategy – Returned +7.5% in Feb. 07”, we illustrated the profit potential of a bull put spreads strategy for CME and we selected positions for options expiration in March of 2007, which returned a very nice +10.5% in 22 days.
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Recently a bidding war has erupted for CBOT as outlined in article, “Two Exchanges May Enter Bidding War to Acquire the Chicago Board of Trade”.
Even if the CME/CBOT merger does not come to fruition, CME is looking bullish and using PowerOptions powerful stock options tools to search for potential candidates returned the following bull-put credit spreads stock options position.
| Chicago Merc. Exch. Hldgs. Inc | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Option |
Expire &Strike |
Bid | Buy Option |
Expire &Strike |
Ask | %Return | Net Credit |
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| CNMPT | 07 APR 500.0 (29) | 3.4 | CNMPQ | 07 APR 490.0 (29) | 2.5 | 9.9 | 0.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The bull put credit spreads positions selected for CME can be entered for $1000 per contract with a potential return of +9.9%, in only 29 days. As long as the price of CME remains above the short strike price at options expiration in April, the position will be fully profitable.
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If the stock price of CME closes below the short strike price of $500 at options expiration the position will not return the maximum profit and could potentially result in a loss, possibly result a significant loss. If the stock price of CME is below $490 at stock options expiration, the position will essentially lose everything that was invested except the initial net credit of $90/contract.
Competitors:
Competitors for CME include: CBOT Holdings Inc. (BOT), Deutsche Börse AG (private), LIFFE (Holdings) plc (private), and Nasdaq Stock Market Inc. (NDAQ).
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the bull put credit spreads strategy.
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[tags] Deutsche Börse AG, LIFFE (Holdings) plc, BOT, CBOT Holdings Inc., NDAQ, Nasdaq Stock Market Inc., bull-put credit spreads, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options [/tags]