Seeking Alpha

Hari Swaminathan's  Instablog

Hari Swaminathan
Send Message
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
My company:
OptionTiger.com
My blog:
OptionTiger Blog
My book:
Top 7 Options Trading Mistakes
  • Trade Idea – Amazon Earnings Trade (AMZN) Straddle 0 comments
    May 15, 2013 12:49 PM | about stocks: AMZN

    This post was originally written on January 8, 2013 at http://www.optiontiger.com/trade-idea-amazon-earnings-trade-straddle/

    Amazon ($AMZN) reports earnings on January 31, and this is an Amazon Earnings Trade. Although $AMZN just hit all-time highs yesterday, it's still a wild card - Earnings could be a hit or miss. Under these circumstances, it's best not to take a directional bet. The Feb series has seen Volatility expanding to 40 already, and I think its reasonable to assume it will increase further leading upto the earnings event, which is still over 3 weeks away.

    Trade and Rationale -

    AMZN Straddle at 265 Feb Series, opened yesterday at 27/share (total for Calls and Puts)

    10 Contracts, 38 days to expiry, Debit- $27000

    Its a Vega positive trade, so the trade will benefit from an increase in Volatility between now and Jan 31.

    Non-directional so we don't care which way AMZN moves.

    Given its recent activity, its possible (small chance) that AMZN may move $27 before the event

    I want to watch for the Volatility because it may happen that a Weekly series may interfere with the Monthly series, in which case we could see a Volatility crush in the Monthly series.

    (click to enlarge)

    AMZN-Straddle-Vol

    EXIT CRITERIA (VERY IMPORTANT)

    We have to exit this trade ON OR BEFORE Jan 31. This is so that we can avoid the Volatility Crush after the event.

    (click to enlarge)

    AMZN-Straddle

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

Back To Hari Swaminathan's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.