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Trade Idea – LinkedIn Short Strangle

|Includes:LinkedIn (LNKD)

This post was originally written on December 11, 2012 at http://www.optiontiger.com/trade-idea-linkedin-short-strangle/

Linkedin has made a nice move upwards. Its up over 20% in the last month, and is hitting the upper Bollinger band today. Both factors combined produce this Trade idea - Linkedin short strangle

LNKD-Chart

LNKD-Profit-Loss

TRADE IDEA:

- LinkedIn should turn back to come well into the Bands again.

- However, the momentum is still up (look at the MACD in the chart 1 above)

- Therefore a safer strategy is a Short Strangle at (Jan expiry) 115 Call and 110 Put

- Credit of $7.9, Max profit of $7900, Margin 21K (33% return in 38 days)

- The credit and Margin is very favorable which is one of the reasons for the trade

- Breakevens at 102 and 123 , creating a $21 profit range (Chart 2 above)

- Position is designed with a Negative delta bias because of Bollinger band reading

- Trade holding time is approximately 3 to 4 weeks.

Please post your thoughts on this trade.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: LNKD