Wednesday, April 29, 2009

Earn 8% in Less Than 6 months

Oracle is gobbling up Sun for 9.50 in cash. This is as much of a done deal there is in the market. With Oracles cash hoard and history of aggressively closing deals, you can surely put this in the books.

Right now JAVA is trading for 9.15 per share. You can easily buy JAVA and hold on to them to earn that .35/share yield (about 3.7%).

However, the options market seems to believe their may be a chance that JAVA will go for more. Take advantage and sell some call options for .10 (Oct strike 10's) and earn an additional .10 to bump your potential yield to 4.5% or up to 9.8% if an offer should come in bumping JAVA to 10/share or more.

Furthermore, the options market seems to believe even moreso that the deal may fall through. Therefore you can also even sell some put options (Oct strike 9's) for .35/each, which can bump up your yield on the investment an additional 3.5+%.

8-13% yield in 6 less than 6 months? I'm sold!

(Options are trading very thinly so you'll probably need to be patient for the options dealer to find a buyer)

Disclosure: Long JAVA, orders outstanding for JAVA puts/calls