Strategic Mindset: Market Neutral with possibilities of Surges in Volatility.
Target: Salesforce (CRM) trading @ $147.83
Commit Criteria: CRM Implied Volatility is overpriced relative to its forecast volatility of 9.81% over the trade period. We are looking for possible price movement but for it to stay within its $130.00 to $165.00 price range until the exit of this trade.
Tactic: Opening 10 CRM June 2012 Iron Condors (strikes [125/130/165/170]) for a $1.15 credit
Tactical Employment of Iron Condor:
- Buying to Open 10 CRM Jun 2012 $170.00 Calls
- Selling to Open 10 CRM Jun 2012 $165.00 Calls
- Selling to Open 10 CRM Jun 2012 $130.00 Puts
- Buying to Open 10 CRM Jun 2012 $125.00 Puts
- Net Credit: $115.00 per Iron Condor for a total of $1150.00
- Max Gain: $1150.00
- Max Risk: -$385.00 per Iron Condor for a total risk of -$3850.00
Mid-Course Guidance:
We will be watching for a price movement near the short strikes. As the short strikes are threatened we will adjust the Iron Condor as necessary.
We don't want trade expectancy dropping below 2.00%. Based on this we have two price targets at which we need to consider an adjustment. CRM trading below $138.55 and above $152.47 are triggers for adjustment.
Profitability Target:
We will wait for this Iron Condor to expire worthless taking the $1150.00 credit as profit.
Exit Tactic: We will wait for this Iron Condor to expire worthless, adjusting as necessary.
Disclosure: I am short CRM.
Additional disclosure: We are looking to enter this position in our Advanced Model Portfolio at Top Gun Options.
