Convexity-based trade scenario using LOAR stock and the April 17

Yo traders -

Let’s map out a convexity-based trade scenario using LOAR stock and the April 17, 2025 $75 Call option — currently trading at $1.00, with the stock at $65.97 and only 18 days to expiry.

🔍 Step-by-Step Breakdown:
🧠 1. Basic Structure
You’re buying the LOAR Apr17 $75 call at $1.00.

This is a deep OTM bet (~13.7% above current price).

You’re betting on a short-term move to $75+, meaning volatility spike or news catalyst.

⚙️ 2. Convexity Setup
Convexity means:
Small risk, asymmetric reward

If LOAR stays flat or dips → you lose $1 per contract

If LOAR rips to $80+ → this option could return 5x to 10x+

LOAR Price at Expiry Option Intrinsic Value Profit/Loss
$66 (flat) $0 -$1.00
$70 $0 -$1.00
$75 (strike) $0 -$1.00
$77 $2.00 +$1.00
$80 $5.00 +$4.00 (5x)
$85 $10.00 +$9.00 (9x)
🧾 3. Chart + Sentiment Setup
Looking at the TradingView chart:

Price Action:

LOAR is basing around $66 after a steep downtrend — potential reversal pattern

Volume is light, but some buy pressure is visible

MACD:

Appears to be flattening and potentially crossing bullish

RSI:

~40s: Oversold-to-neutral zone. Could support upward bounce.

Earnings coming up (E icon):

Strong potential for a catalyst move

This setup enhances convexity, because earnings can produce gap moves that DOTM options profit from disproportionately.

🔮 4. Convexity Scenario Thesis (Narrative)
"LOAR has pulled back hard and is showing signs of base-building. Earnings are in 2–3 weeks. If guidance surprises to the upside — or macro tailwinds hit the sector — a short squeeze or re-rating toward $75–80 could occur. I’m risking $1 per contract for a shot at $5–10. If it doesn’t move, I accept the full loss."

This is a classic event-driven convexity play.

⚠️ 5. Risks & Considerations
Time decay is brutal: With only 18 days left, theta decay accelerates daily
IV Crush post-earnings could hurt even if the stock moves
You need a fast, strong move, ideally before or at earnings
Position sizing is critical: This is a "lottery ticket" — don’t over-allocate

✅ 6. Ideal for Your Strategy If:
*You're making many small bets like this across tickers/catalysts
*You’re not trying to be “right” often, but “big” occasionally
*You have capital discipline and uncorrelated base assets




🧮 Position Size:
Option price = $1.00 per contract

You buy 100 contracts of the $75 call

Total risk = $100

Each $1.00 move above $75 = $100 profit per $1, since 100 contracts × 100 shares/contract = 10,000 shares exposure

📈 Upside Payoff Table
LOAR Price at Expiry Intrinsic Value Total Payoff Net P&L Return on $100
$65–$74.99 $0.00 $0 -$100 -100%
$76 $1.00 $1 × 10,000 = $10,000 +$9,900 +9,900%
$77 $2.00 $20,000 +$19,900 +19,900%
$80 $5.00 $50,000 +$49,900 +49,900%
$85 $10.00 $100,000 +$99,900 +99,900%
$90 $15.00 $150,000 +$149,900 +149,900%
$100 $25.00 $250,000 +$249,900 +249,900%
🧠 Interpretation
Max Loss: $100 (fixed, regardless of LOAR's move down or sideways)

Breakeven at Expiry: LOAR must hit $76.00

10x return if LOAR trades just $1 above strike

Massive asymmetry — you risk $100 for a shot at $10k–250k if LOAR rips on earnings or news.

📌 Real-World Considerations:
You might exit early if the option spikes in value before expiry (e.g., stock runs to $72 with 5 days left).

Liquidity may limit large size fills.

Volatility matters: IV spike pre-earnings or a big gap post-earnings increases your chance of profit.


📊 Convex Payoff Table for LOAR Apr17 $75 Call (100 Contracts, $100 Risk)
LOAR Price at Expiry % Move from $65.97 Intrinsic Value Total Payoff Net P&L Return on $100
$65–$74.99 0% to +13.6% $0.00 $0 -$100 -100%
$76 +15.2% $1.00 $10,000 +$9,900 +9,900%
$77 +17.0% $2.00 $20,000 +$19,900 +19,900%
$80 +21.3% $5.00 $50,000 +$49,900 +49,900%
$85 +28.9% $10.00 $100,000 +$99,900 +99,900%
$90 +36.4% $15.00 $150,000 +$149,900 +149,900%
$100 +51.6% $25.00 $250,000 +$249,900 +249,900%
🧠 Takeaway:
Even a 15% move turns your $100 into $10,000 — this is why convex trades are so powerful.

But the trade-off is probability: the odds of a 15–50%+ move in 18 days are low, which is why risk is capped and position sizing matters.