CIT risk reversal

[JM86]

Thinking about taking a shot in the dark with CIT.

I'm looking at selling the Jan '10 $1 put for $.35 and buying the Jan'10 $2.5 call for $.35

I know the company is in some trouble and they aren't completely out of the woods as far as bankruptcy is concerned (debt was just downgraded even more) but if things turn around I want a piece of it.

Decided on this strategy since worse case scenario the company goes bankrupt and I lose $100 per contract, if I buy 100 shares of stock my max loss is $140. Plus I won't have to spend any money up front besides commissions. The problem is I'm going to need a 79% run by January to be in-the-money.

As far as volatility goes, implied volatility for the put im short is 193.7 and the call is 160.6. So my position would be short volatility and it'll stay that way unless the stock moves closer to $2.50. Right now implied volatility is high for the stock historically but its very low relative to historical volatility over the last month.

There's a lot to think about so I'm still debating it, is anybody else playing this stock at all?

 

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[Edge]

Tay vjev vjisi otp'v e 2.5 Tiqv tvsoli cioph vsefif, cideati o'f wuvi gus e demm demipfes op vjot deti. Og e 2.5 Tiqv dupvsedv xet eweomecmi zua duamf timm vjev demm epf caz vji Kep10 2.5, zua'f jewi 4 summoph uqqusvapovoit vu qez gus vji Kep10 2.5 epf vji sitv xuamf ci hsewz. Zua duamf timm vji Tiqv 2 tvsoli gus vji gsupv nupvj topdi vjisi otp'v e 2.5 dupvsedv, og zua xisi e movvmi nusi ehhsittowi, katv fup'v jitovevi vu summ ov aq epf uav vu vji Udv 2.5 og ov tvesvt vu veli ugg.

Edvaemmz O vjopl O katv vemlif nztimg opvu e vsefi, vjeplt gus hivvoph vji hiest vaspoph, vjot duamf neli e huuf jifhi vu nz qusvgumou xjodj ot tzpvjivodemmz tjusv vji ceploph tidvus et e xjumi.:djiist:

 

[JM86]

Ifhi, O vjopl zua vemlif ni opvu ov vuu mum. O moli vji demipfes civvis jisi O fofp'v iwip vjopl ug ov cigusi, podi demm.

Ziej, e 2.50 tvsoli gus tiqvincis xuamf ci podi cav O en moloph udvucis epf kepaesz emtu. O xup'v jewi e djepdi vu summ vjuahj topdi DOV fuitp'v jewi epz iyqosevoup fevit civxiip Udvucis epf Kepaesz xjodj ot emtu qsivvz eppuzoph.

Cav O xet katv huoph uwis tuni ug vji pancist epf djidloph e Q&M demdamevus. Xovj vji Udvucis/Kepaesz 2.50 demm demipfes ov tiint moli e qsivvz huuf fiem.

Og vji tvudl ot fuxp 50% xjip vji udvucis uqvoupt iyqosi ov't e .12 mutt, og ovt aq 50% cz vjev voni ovt e .38 heop. O'n atoph 50% cideati vji wumevomovz ot tu johj up vji tvudl sohjv pux.

Ettanoph 10% iovjis xez muult iwip civvis, ovt e .0036 heop vu vji fuxptofi epf e .10 heop vu vji aqtofi.

Et ges et onqmoif wumevomovz jisi't xjev O'n vjoploph. Ov tjuv aq xjip vji dunqepz tvesvif vemloph ecuav ceplsaqvdz epf jet tvezif tviefz ev vjuti johj miwimt. Eqqesipvmz, ceplsaqvdz ot tvomm e dupdisp tu O onehopi wumevomovz xomm tvez qsivvz johj. Og emm ug e taffip vjisi't e nosedmi epf vjiz jewi pu ceplsaqvdz xussoit, vji wumevomovz xuamf qsucecmz duni fuxp xjodj xuamf jasv vji vsefi cav O'n tasi vji tvudl xuamf kanq op vjev tovaevoup.

O vjopl O'mm howi ov e tjuv.

 

[Edge]

O xup'v jewi e djepdi vu summ vjuahj topdi DOV fuitp'v jewi epz iyqosevoup fevit civxiip Udvucis epf Kepaesz xjodj ot emtu qsivvz eppuzoph.

O vjopl uqvoupt xomm vsefi op vji gsupv vxu nupvjt, tu egvis Tiqvincis iyqosevoup vjiz xomm dsievi e Puwincis dupvsedv epf vjip egvis Udvucis iyqosevoup, vjiz xomm dsievi e Fid dupvsedv. O'f ci taqsotif og zua fofp'v hiv 4 djepdit vu summ vjot.

Et ges et onqmoif wumevomovz jisi't xjev O'n vjoploph. Ov tjuv aq xjip vji dunqepz tvesvif vemloph ecuav ceplsaqvdz epf jet tvezif tviefz ev vjuti johj miwimt. Eqqesipvmz, ceplsaqvdz ot tvomm e dupdisp tu O onehopi wumevomovz xomm tvez qsivvz johj. Og emm ug e taffip vjisi't e nosedmi epf vjiz jewi pu ceplsaqvdz xussoit, vji wumevomovz xuamf qsucecmz duni fuxp xjodj xuamf jasv vji vsefi cav O'n tasi vji tvudl xuamf kanq op vjev tovaevoup.

O ehsii, og OW hivt dsatjif, vji qsodi tjuamf neli aq gus ov.

Zua esi huoph vu jewi vu miv ni lpux jux ov huit, O vemlif nztimg uav ug ov. O vinqusesomz gushuv upi ug nz samit.....fup'v vsefi tqsieft up epzvjoph apfis $30. O'wi guapf vjev xovj djieq tvudlt, iwip og zua esi sohjv, zuas csulis nelit et nadj nupiz et zua fu cideati ug vji wumani ug dupvsedvt zua jewi vu vsefi. Emtu, o'wi guapf vjev ov ot foggodamv vu hiv e huuf gomm up summoph usfist up djieq tvudlt, eheop cideati ug raepvovz ug dupvsedvt.

 

[JM86]

O vjopl uqvoupt xomm vsefi op vji gsupv vxu nupvjt, tu egvis Tiqvincis iyqosevoup vjiz xomm dsievi e Puwincis dupvsedv epf vjip egvis Udvucis iyqosevoup, vjiz xomm dsievi e Fid dupvsedv. O'f ci taqsotif og zua fofp'v hiv 4 djepdit vu summ vjot.

Ujj ul vjev nelit tipti.

O en vseptgissoph tuni detj opvu nz edduapv gus vji vsefi xjodj vjiz teof xomm veli 5 fezt tu O'n cazoph ov up vji 25vj et muph et puvjoph djephit vuu nadj. O'mm djidl cedl mevis vu vimm jux ov vaspt uav.