Income Fly in YHOO

[Steven Place]

YHOO is rising higher, and the implied volatility is rising.

While it never really went parabolic, it’s at “frothy” levels and I’m expecting a new range to develop.

Here is the first part of the trade…. this is a SCALING approach so I intend to ADD capital by rolling the trade.

Sell to open YHOO Dec 50/45 put spread for 1.30
Sell to open YHOO Dec 50/55 call spread for 2.00

Here’s what the trade looks like:

So this trade does start of net short… and I do expect YHOO to (probably) squeeze higher.

IF THAT HAPPENS I will roll the call side to higher strikes. That will require more capital, but also widen out my breakevens and increase my odds, as well as increasing my theta.

[Steven Place]

We never really saw a squeeze higher in YHOO, and with today’s pullback we’re sitting at some really nice gains.

The trade is currently up around 35% return on risk, which is great for this kind of trade.

DO NOT GIVE THOSE GAINS BACK. If you want to try and milk it for more theta that’s fine but you MUST have levels that you plan to exit this trade on.

In case you just want to ring the register, here’s the closing orders:

BUY TO CLOSE YHOO Dec 50/45 bull put spread @ 1.36
BUY TO CLOSE YHOO DEC 50/55 bear call spread @ 1.27

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