Matthew Whiz Bu...'s  Instablog

Strategic Mindset:Market Neutral with possibilities of Surges in Volatility.

Target:FFIV trading @ $97.76

Commit Criteria: FFIV Implied Volatility is overpriced relative to its forecast volatility of 8.57% over the trade period. We are looking for possible price movement but for it to stay within its $85.00 to $110.00 price range until the exit of this trade.

Tactic: Opening 7 FFIV September 2012 Iron Condors (strikes [80/85/110/115]) for a $0.79 credit

Tactical Employment of Iron Condor:

- Buying to Open 7 FFIV Sep 2012 $115.00 Calls

- Selling to Open 7 FFIV Sep 2012 $110.00 Calls

- Selling to Open 7 FFIV Sep 2012 $85.00 Puts

- Buying to Open 7 FFIV Sep 2012 $80.00 Puts

- Net Credit: $79.00 per Iron Condor for a total of $553.00

- Max Gain: $553.00

- Max Risk: -$421.00 per Iron Condor for a total risk of -$2947.00

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. FFIV trading below $90.48 and above $101.79 are triggers for adjustment.

Profitability Target:

We will wait for this Iron Condor to expire worthless taking the $553.00 credit as profit.

Exit Tactic: We will wait for this Iron Condor to expire worthless, adjusting as necessary.

Disclosure: I am short FFIV.

Additional disclosure: We are looking to enter this position in our Advanced Model Portfolio at Top Gun Options