Straddle Buy in HAL

[Steven Place]

Here’s my thought process on the trade

1. While the overall markets have been moving, energy has been strangely absent in all of this. Most likely due to oil weakness, but if you look at OIH and XLE, these indexes haven’t moved.

2. HAL is forming what would normally be called a bear wedge pattern. It will most likely move soon.

3. The Sep straddle is going for 3 bucks. That means if HAL moves 3 points in either direction you are profitable at expiration. 3 points is nothing.

4. The IV of HAL is at 6 month lows, so if it does selloff, we’d see a pop in implieds back up to 24%

Here’s the trade I like:

Buy to open HAL 68 straddle for 3.05

We’re looking for 25% return on our risk or more. If HAL hasn’t moved in 2 weeks, cut the trade.

[Author]

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