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johnshepherd59
 

Registered: May 2012
Posts: 77

 

08-07-12 05:05 PM

The August straddle predicts a move of only 8%. This might as well happen, but given that PCLN has a history of making big moves, an 8% prediction seems to be low to me. Last earnings, PCLN moved only around 2%. I doubt this happens again. I don't normally hold straddles after earnings, but there is a good chance PCLN straddle will make money.

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diaoptions
 

Registered: Aug 2011
Posts: 392

 

08-07-12 05:07 PM

Earnings straddles are too risky and they rarely pay off. Consider a call butterfly instead, with the wings plus/minus $50.00 and the body ATM - $680.00.


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johnshepherd59
 

Registered: May 2012
Posts: 77

 

08-07-12 05:20 PM

The stock is up around 2 and a half % with no news. Frankly, I expect it to jump or tank more than 10% after earnings. Yes, straddles rarely make money, but sometimes you need to look at risk/reward. What's the worst that can happen here? You lose 60-70% loss at worst IMHO. Best case scenario is a three-bagger if it moves 20% IMHO.

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johnshepherd59
 

Registered: May 2012
Posts: 77

 

08-07-12 05:43 PM

Someone posted PCLN post-earnings move on seeking alpha. Based on this history, seems to me like PCLN straddle will probably make money if you hold it for two days. It more often than not makes >8% move in two days.

http://seekingalpha.com/article/786...gs?source=yahoo


On May 9, 2012, PCLN declined 3.5% in after-hours trade after beating Q1 earnings estimates and setting its Q2 guidance in line with expectations. The stock moved deeper south the next day, closing the May 10 regular session off 5.2%.
On Feb. 27, 2012, PCLN jumped 6.4% in night trade after posting better-than-expected Q4 results and setting its Q1 guidance in-line to above Street estimates. The stock added modestly to those gains the next day, rising 6.9% in the Feb. 28 regular session.
On Nov. 7, 2011, PCLN advanced 2.4% in after-hours trade after topping Q3 expectations. The stock added to its upside the next day, rising 8.6% by the close on Nov. 8.
On Aug. 4, 2011, PCLN surged 9.8% in evening trade after reporting better-than-expected results and guidance. The stock held the bulk of its gains the next day, but it narrowed slightly - ending the Aug. 5 regular session up 9.2%.
On May 5, 2011, PCLN gained 1.7% in night trade after topping Q4 EPS estimates, missing on revenue, and setting its Q1 EPS guidance above the Street view. The stock reversed direction the next day, closing the May 6 regular session down 2.8%.
On Feb. 23, 2011, PCLN advanced 4.5% in after-hours trade after beating Q4 EPS expectations and setting its Q1 earnings view above the Street estimate. The stock moved further north the next day, closing the Feb. 24 regular session up 8.5%.
On Nov. 8, 2010, PCLN gained 5.8% in evening trade after posting better-than-expected results and guidance. The stock surged higher the following day, gaining 8.2% by the Close on Nov. 9.
On Aug. 3, 2010, PCLN surged 16.1% in after-hours action after posting better-than-expected results and guidance. The stock jumped higher the next day, rising 21.9% by the close on Aug. 4.
On May 10, 2010, PCLN tumbled 11.9% in after-hours trade after reporting disappointing Q1 revenue and setting its Q2 EPS view below Street estimates. The stock added slightly to its downside the following day, closing the May 11 regular session down 12%.
On Feb. 17, 2010, PCLN gained 7.1% in after-hours trade after reporting better-than-expected results and guidance. The stock added to its upside the following day, closing the Feb. 18 regular session up 9.4%.

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diaoptions
 

Registered: Aug 2011
Posts: 392

 

08-07-12 07:56 PM

WEEKLY PCLN OPTIONS

  • Buy 1 630 Call @ $54.90
  • Sell 2 680 Calls @ $22.20 x $44.40
  • Buy 1 730 Call @ $4.00
  • Total Debit $1,450.00
  • Maximum Profit $3,550.00 if PCLN is $680.00 at expiry.
  • Maximum Loss $1,450.00 if PCLN < $630.00 or > $730.00 at expiry.



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Doobs789
 

Registered: Feb 2008
Posts: 558

 

08-07-12 08:46 PM


Quote from diaoptions:

WEEKLY PCLN OPTIONS
  • Buy 1 630 Call @ $54.90
  • Sell 2 680 Calls @ $22.20 x $44.40
  • Buy 1 730 Call @ $4.00
  • Total Debit $1,450.00
  • Maximum Profit $3,550.00 if PCLN is $680.00 at expiry.
  • Maximum Loss $1,450.00 if PCLN < $630.00 or > $730.00 at expiry.






I'd be inclined to go wider and further out.

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