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SPDR S&P 500 ETF Message Board

  • golfrattt53 golfrattt53 Jun 29, 2013 11:45 PM Flag

    Mapping out an Options Strangle play into Pcln 8/6 earnings....

    Obviously want to profit on a ride in volatility into earnings..

    In a flat market, i wouldn't worry too much about taking this position except that market volatility is already elevated...

    Pcln is already up 10% in 7 weeks since last earnings, recent high is the same as all the indexes, 5/22..

    Based on past performance, looking for a 5-7% move into 8/6. ATM IV is 25%, last 4 earnings have seen IV peak in the 45-55% range...

    My concern, and how/if i should adjust for it, is if for some reason, however unlikely, that markets move up thru earnings, perhaps in part to the traveling road show that is the Fed Prez tour attempting to suppress QE ending fears, and Vol drops, the put side of this trade can crash and destroy the trade...

    That even if Pcln moves up with markets in this scenario, there may still not be enough conviction on the call side behind the move to warrant a Delta neutral position. Perhaps a setup that favors the upside to offset a drop in Put IV with a move north...

    I'm completely overthinking this trade, the reason i'd like some feedback. Pcln is only down 2% off the 5/22 high while the S&P is down 5%, so it's been resilient.. thoughts..?

    My feeling is to weight the trade to the call side, if markets dump and Pcln goes with it, then the put side will do very well, i think...

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