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Hari Swaminathan
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OptionTiger.com is founded by Hari Swaminathan, an entrepreneur, everyday person and a self-taught Options trader for over 5 years. Hari also writes the blog at OptionTiger.com, an insightful commentary of the most important issues in macroeconomics, investing, trading, Option strategies, Index... More
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  • Trade Idea – LinkedIn Short Strangle 0 comments
    May 15, 2013 11:49 AM | about stocks: 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

    (click to enlarge)LNKD-Chart

    (click to enlarge)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
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