Email – #435

Do you want to know how you can get triple digit returns from USAir?

If you said yes, just keep reading.

We are going to leg into a spread on our USAir position. This will take half the risk off the table and set us up for the potential of a triple digit return and maybe even a quadruple digit return, much like we have done in the past with Chesapeake Energy, IAC and currently with Tenet.

Here’s what you need to do. Based on our $0.85 entry price on USAir, we are up about 70% (current bid is $1.40).

You have two choices. If you CANNOT engage a spread or do not want to, sell your USAir January 2010 $10 calls (LUL AB) at current prices to lock in a profit.

Or…

If you want an even lower risk trade going forward, sell the USAir December 2009 $12.50 calls (LCC LV) against your position (2009, not 2010 – this is called a calendar spread).

These calls are paying $0.40 currently on the bid. By selling the calls against your position, you are limiting your upside to $2.50 ($12.50 minus $10), but also taking half of your money off the table.

If USAir does not go over $12.50 by December expiration, you will have to reduce your risk by almost half. If it does go to $12.50 or higher, you will make almost 6 times your money.

Sell the USAir December $12.50 calls (LCC LV) against your position at current levels of $0.40.  If you cannot do the spread, then sell your current position and take a quick profit of more than 70% in just a few weeks.

Karim