NaughtyPines

TRADE IDEA: ATVI FEB 17TH 34/38.5/40/44.5 IRON CONDOR

NASDAQ:ATVI   ACTIVISION BLIZZARD, INC - COMMON STOCK
ATVI             announces earnings tomorrow after market close, so look to put on a play in the waning hours of the NY sesh ... . Its implied volatility rank is >70%, and its background volatility is on the cusp of 50% ... .

Metrics:

Probability of Profit: 50%*
Max Profit: $231/contract
Max Loss/Buying Power Effect: $219/contract
Theta: 11.33/contract
Delta: -2.47/contract
BE's: 36.19/42.31

Notes: * -- The body of this is so narrow such that it's almost an iron fly; hence, the piss poor POP%. I considered doing the standard 20-delta iron condor here, but just couldn't squeeze out enough credit to satisfy me. I'll basically look to treat it like an iron fly, and look to take it off at 25% max profit.
Komen: One-pennied it; filled for 2.30.
Komen: Given the move post-announcement (up to $44 or so), going to roll up the 38.5 to the 40 strike. Doubt it's going to give up everything back to $40 in a week ... . I can anticipate having to roll out the short call side, and bringing in some extra credit on the put side can't hurt here.
Komen: Yowsa. Rippage. Covered the short put for a .05 debit here; the long put is no bid, so I'll let it expire worthless. Rolled the short call side to the Feb 24th 40.5/48.5 for a 1.27 credit, so my scratch point is 2.30 + 1.27 - .05 (excluding fees/comms) = 3.52. Will look at what I can do on the put side next week ... .
Komen: Here's the put side pro: March 31st 39/42.5 short put vert for a .39 credit. It isn't much protection in the scheme of things, but I wanted to set it up below the break even for the call side.
Komen: Tweaking the call side somewhat. I discovered that rolling the call side as a unit was "troublesome" (wide bid/ask; difficulty getting filled at the mid). What I consequently decided to do was roll the long call out to the May expiry (the 55 strike), and the short call out to the March 17th expiry (to the 40 strike, since there are no half strikes available in the monthlies). This way, I can focus on just rolling the short call without bundling it with the long call. I received a net credit for doing this of .34, so my cost basis is now 3.52 + .34 + the .39 I received for the short put spread = 4.25.
Komen: With my March 31st put side protection nearing worthless (it's currently at .07), I'm adding in some more long delta here to this headache trade: an April 21st 41/44 short put vert for a .36 credit. Scratch point is at 4.61.
Komen: Covering the March 31st 39/42.5 short put vert for a .06 db. Scratch point is at 4.67. One thing I may consider doing at March expiry is closing out the call side (the short call is deep ITM), selling shares and working it as a covered put. It may be somewhat easier to work OTM puts than ITM calls here ... .
Perdagangan ditutup secara manual: First, my math is off with the last covering: I closed for a debit, so my scratch point would be total credits received (4.61) minus the debit paid = 4.55. In any event -- sometimes you just have to throw in the towel on working a broken setup back to scratch with something resembling your original setup. Here, I'm opting to (a) close out the call side (which I did for an 8.40 db); (b) sell 100 shares at 48.91 (a 48.91 debit); (c) roll up the 44 short put from my April 21st 41/44 short put vertical to the April 21st 47 short put for a .52 credit; and (d) close out the 41 long put for a .07 credit, yielding a "covered put" with a short put at the April 21st 47 strike. I will continue working that setup in a separate post, as this one's getting "long in the tooth."
Komen: Lol. Gosh, I must be tired -- another correction: "Sell 100 shares at 48.91 (a 48.91 credit).
My man; sometimes you gotta do the simplest trade and just buy and uncovered call when something is waving going into summer months with big releases incoming. Thanks for the great detail and updates however; I appreciate people like you who explain your trades in depth and keep the community updated :) Best wishes !
Balas
Hi NaughtyPines thanks for sharing this trade. I am not really an expert of trading Iron Condors but I was a bit puzzled by the fact that it was an earnings trade with so little to give with the shorts. In other words (from what I can gather) you were hoping the volatility would somewhat collapse post earnings with little or no movement in the stock. Do you trade many IC around earnings? And if so have they generally been successful?
Balas
NaughtyPines glennjoy1
@glennjoy1, I was hoping for both (a) volatility contraction; and (b) price to stay within my breakevens for the setup. I got the contraction, but it moved "a touch" too much -- way beyond 1 SD. To take a vague stab at it, about 1 in 4 "go awry" and require some work post-earnings to mitigate loss or get them back to scratch. This is one that went awry (wayy awry), so it will require some work. But when they work out, they work out immediately. (See DKS, URBN posts). That being said, it's the ones that don't work out which will affect your P and L most profoundly, so having broken trade management "chops" is a must.
Balas
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