TRADE IDEA: GPS JULY 1ST 17.5 SHORT STRADDLE

May 17, 2016

One of the few earnings plays this season that meets my >70 implied volatility rank, >50 implied volatility criteria -- GPS. It announces on Thursday after market hours, but I won't have time to fiddle with it then, so I'm shooting for a fill here. I looked at both an iron condor and a short strangle, but those didn't have enough juice in them to make them worthwhile given the price of the underlying. I'm also going farther out than usual for an earnings play, as I generally like to give straddles greater leeway to work themselves out with time (although I'm naturally hoping we get beaucoup volatility contraction post-earnings such that I can take it off fairly immediately).

Metrics:

Probability of Profit: 56%
Max Profit: 208/contract
Max Loss/Buying Power Effect: Undefined/~$350
Theta: 2.24/contract
Delta: -3.3/contract
Break Evens: 15.42/19.58

Notes: A short straddle is a short call and short put at the same strike ... . Unlike a strangle, I'll look to manage this at 25% max profit because the "profit zone" is somewhat narrower as compared to an iron condor or short strangle ... .

May 17, 2016

Note

Didn't have to putz with it much; filled for $205 ... .

May 19, 2016

Note

Pinned against 17.50 post-announcement AH. Ideal for this play, assuming I don't get much movement from there and there is also a volatility collapse post-earnings.

May 27, 2016

Trade closed manually

Covered this today for a $180 debit, yielding a net profit of 25/contract. Not exactly stellar, but freeing up buying power and reducing risk in advance of the long holiday weekend where possible ... .