Today, I decided to gamble... I haven't really made any gambles in a while. In any case, I've been keeping my eye on SanDisk (SNDK), and I believe that while there are clearly reasons to be concerned about the flash memory pricing environment, the company is starting to trade at a price that warrants some attention.
Yes, I know the stock is making new lows, and that's what really makes all of this a bit of a gamble. It's not a big gamble size-wise, but it'll allow me to scratch my market gambling itch and also to put money where my mouth is. Details of my bet follow.
Long Jan 32.50 Calls (SWQAZ) @ 1.95
Short Jan 37.50 Calls (SWQAU) @ 0.30
Net Debit: 1.65
Basically, transaction fees aside, I stand to lose a maximum of $165 per contract, and I stand to gain a maximum of $335 per contract. Upon expiration, the break-even point is SNDK trading at 34.15, and I lose the maximum when SNDK trades at or below 32.50, and gain the maxium when it trades at or above 37.50. My net gain/loss in between is purely linear.