In article, “CME Buying CBOT”, we analyzed Chicago Mercantile Exchange’s (CME) purchase of CBOT (BOT) with an eye for a bullish strategy for CME. We continued the CME bull put credit spreads saga and for the month of April, the strategy returned a very nice +9.9% return. Overall the CME bull put credit spreads strategy has returned a whopping 40% return in only five months!
The bidding war between CME and ICE for CBOT continues as outlined in the article, “Two Exchanges May Enter Bidding War to Acquire the Chicago Board of Trade”.
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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:
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| Chicago Merc. Exch. Hldgs. Inc | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Option |
Expire &Strike |
Bid | Buy Option |
Expire &Strike |
Ask | %Return | Net Credit |
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| CNMQT | 07 MAY 500.0 (23) | 2.85 | CNMQQ | 07 MAY 490.0 (23) | 1.75 | 12.4 | 1.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The bull put credit spreads positions selected for CME can be entered for $1000 per contract with a potential return of +12.4%, in only 23 days. As long as the price of CME remains above the short strike price at options expiration in May, the position will be fully profitable.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 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 $110/contract.
Competitors:
Competitors for CME include: CBOT Holdings Inc. (BOT), Deutsche Börse AG (private), LIFFE (Holdings) plc (private), and Nasdaq Stock Market Inc. (NDAQ).
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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]