August 16, 2016 at 9:15 pm #6757
Setup: Vol Buy
VXGOG, which is the VIX for GOOGL options, is currently sitting under 15%.
That means, more or less, that the GOOGL options board is expecting either 15% to the upside or downside… in a year. Heck, GOOGL can move 15% in a month, easy.
The stock is currently rangebound after a gap up on earnings. If the stock is still rangebound in the next 5-7 trading days, I will initiate a long strangle position in October options.
Right now, I’m looking at the 840/760 strangle buy. Into opex, you’d need to see a move of about 50 points, or 6%. And you’ve got a 2 month timeframe (this isn’t including any rise in implied volatility).
6% swings are very common in this stock. Vol is crazy cheap right here.
So I’m waiting 5-7 trading days because I’m always early on my vol buys, and I will scale into the trade.August 26, 2016 at 11:05 am #6832
Ok I’m ready to pull the trigger on this.
First off, if you want to be really aggressive…
The Sep 797.50 straddle is going for $18.60.
That seems like a lot until you actually look at the price over strike.
With this pricing, GOOGL options are pricing in 2.3%.
That’s just over 2%, in 20 days. Vol is stupid low.
I’m going to go with a less aggressive trade and pick up some October options. Here’s the trade:
IWO Premium Order Ticket Type Asset Duration Strike C/P BTO GOOGL 21 Oct 16 830 Call BTO GOOGL 21 Oct 16 770 Put Total Debit: 24.3
Now if this is too rich for you, simply sell the 840 call and the 760 put to make it an iron condor.
I will add to the trade at 18.00 and I will adjust the trade after a 5% move in either direction.August 26, 2016 at 11:29 am #6835
Also, if you want a cheaper vol bet, FB is a great candidate too.August 26, 2016 at 12:04 pm #6837LukeParticipant
Hey Steven, what would you consider on the FB side of things? Not sure what the best strike combo is here. Thanks!August 29, 2016 at 6:00 am #6844dax50Participant
To increase the odds for the trade you could go out to NOV opex to include the presidential elections. It´s a macro event that will lead to more volatility one way or the other imo.August 29, 2016 at 8:32 am #6845MarcoParticipant
Nov election is a known unknown. After brexit, chances are is gonna get priced in very soonAugust 29, 2016 at 10:29 am #6849
@info — I’ve thought about that, but odds are we’ll see vol headed into the elections. We’ve been in the quietest market in a long time, and we’ve got some fed voodoo coming up on deck.August 29, 2016 at 10:30 am #6850October 11, 2016 at 10:02 am #7100
Taking the loss on this one. Very low odds that we’ll see any kind of movement in GOOGL to get the value back on this trade.
After a month of cheap options and no stock movement, we had another month of the same.
IWO Premium Order Ticket Type Asset Duration Strike C/P STC GOOGL 21 Oct 16 830 Call STC GOOGL 21 Oct 16 770 Put Total Credit: 3.15
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