My idea involves a very clandestine effort, preferably in the dark of the night. GOOG ($735.50, off $2.60) earnings is Tuesday January 22, four days after January expiration. The option volatility is very high now for options that expire after January expiration? Why? Because all option expirations after the January 18 expiration, will experience the potential wrath of GOOG earnings.
I am looking at a Butterfly trade that I would enter now, stay in 3-4 days, and get out of town. Please wear your Navy Seal outfit when doing this strategy!
Buy 1 January (Jan 18 expiration) 720 strike call
Sell 2 January ( Jan 18) 735 calls
Buy 1 January (Jan 18) 750 call
Total Debit: $10.35 ($1035)
Total Risk: $ 4.65 ($465)
Breakevens: $730.35 and $739.65 (excludes commission and assumes position held until expiration, which I’m not recommending)
Plan: This is an 8 day trade that I’m looking to be in only about 4 days. I want to be out by Monday (the 14th) preferably. I’m looking for a yield of about 25% on my risk capital of $465. That’s about $116 excluding commissions. I might look to exit the trade if we go under $718 or over $750. Why? Don’t want to lose much more than I expect to make.
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