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Strategic Mindset: Market Neutral
Target: NTAP Trading @ $37.47
Commit Criteria: (NASDAQ:NTAP) NetApp, Inc. has its Implied Volatility is overpriced relative to a reasonable prediction of its forecast volatility. We are looking for possible price movement but for it to stay within its $32 to $46 price range until the exit of this trade. NTAP has not been near $46 for many months and has not been below $32 since the end of July 2010.
Warning: NTAP may have an earnings announcement near the expiration date of this trade. The date is uncertain and will need to be watched closely. If the earnings are to be announced before 2/18 we will be exiting this trade 1-2 days before the announcement. This should still allow for Theta erosion to give us a decent profit.
Tactic: OPENING 30 NTAP Feb 2012 28/32/46/50 Iron Condors @ $0.58 Credit
- Buying to Open 30 NTAP Feb 2012 50 Calls
- Selling to Open 30 NTAP Feb 2012 46 Calls
- Selling to Open 30 NTAP Feb 2012 32 Puts
- Buying to Open 30 NTAP Feb 2012 28 Puts
- As an Iron Condor
- For a net credit of $0.58 ($58 per Iron Condor for a total of $1740.00)
- Maximum Gain: $1740.00
- Maximum Loss: $3.42 ($42per Iron Condor for a total of $10,260.00)
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.
Special note - around Feb 10th we need to pay special attention to the day that NTAP will be announcing earnings. There is a possibility of this announcement happening right before the options expiration and if so we need to exit the trade 1-2 days BEFORE the earnings announcement.
Profitability Target: We will allow this position to expire worthless and keep the full $1740.00 credit.
Exit tactic: Allow to expire worthless.
Remember, tomorrow is the Advanced Live Trade Brief at 0900 Eastern when Doug reviews current positions in the Model Portfolio and looks to add a couple new ones.
Again, welcome aboard the Top Gun Options Trading Squadron and enjoy the remainder of 'Flight School.'
Happy Hunting and Make Sure You Hedge!
Matt 'Whiz' Buckley
CEO and Founder
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.