NEW TRADE:  Buy/Write

Cardinal Health (CAH):  61.56

We were called out of Cardinal Health stock over the weekend and let’s get back most of the difference between our strike and entry price. With earnings coming up this Thursday (8/11), we can take advantage of the elevated implied volatility in the CAH options with a buy/write for 8/19 and not worry if the earnings report is a beat or miss.

TRADE ACTION:  Open a Buy/Write on CAH buying the stock and selling the 19 Aug 62.50 call for a net debit of around 60.15. 

Buy CAH stock at market (around 61.55)

Sell to open the CAH 19 Aug 62.50 call

The Math: If the stock beats earnings and runs above our call strike by 8/19, we will keep the 1.45 or more of premium plus the difference between the 62.50 and the current CAH stock price of around 6.155 (0.95) … a total return of around $2.40 or $240 per contract.