Rationale:
-STZ traded down ~4.5% on 2/20 on news of lowered sales guidance (high single digit beer sales growth) while STZ was presenting at conference); price action has been sideways since and IV continued to elevate
-went relatively aggressive on this trade (20 delta on each side) as I choose strike based on vol skew and the 155/185 strikes were the would benefit from flattening skew based on viewing skew change as if Apr skew becomes Mar skew
-IVR=56%
-IV/HV=1.41
-potential ROC=450/2402=18.7%
Trade Planning
-stop loss: 450-675 (1x-1.5x credit)
-quickly add hedge if this catches momentum to either side
2019-03-13 18:31:45
-took this trade off, given its been sitting in profit with both options slowly losing time value - wanted to exit while things are going as planned given earnings is on 4/4
-captured ~25% of premium
-still analyzing how I can use skew to choose strikes more efficiently
-IVR @ exit = 70%
-IV/HV @ exit = 154.8%
-so the question is how did I make money if IVR & IV/HV is higher at exit - it has to be skew and theta
-stock is pretty much flat from entry
Execution detail:
Date/time | Symbol | Side | Price | Position |
---|---|---|---|---|
2019-02-26 15:51:24 | APR18 19 185 CALL | sell | $2.100 | short |
2019-02-26 15:51:24 | APR18 19 155 PUT | sell | $2.400 | short |
2019-03-13 15:45:50 | APR18 19 185 CALL | buy | $1.780 | 0 |
2019-03-13 15:45:50 | APR18 19 155 PUT | buy | $1.580 | 0 |
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