BIDU earnings

anyone else here selling straddles at 115 and hedging with strangles? (iron butterfly right?)

I'm doing a variety of plays:

- sell 115 feb straddles (9.70 avg)
- hedges include: 105/125 long feb, 100/135 long Mar, and some extra longs at 130 (call) feb and 100 (put) feb.

IVs are off the chart.

furthermore, doing the 105/125 feb hedge on the 115 feb short straddle has a net credit of 7.00. Risk is pretty low, considering the sold straddle covers nearly a 10pt move, and 105/125 are 10 pts away from strike.

Now I'm contemplating whether to hold to options exp or just close tommorow if we pass over the 115 strike after open.

Any ideas? This almost seems too good to be true. And perhaps it is.

We'll see.

 

When you say the 105/125 hedge, do you mean long the 105 puts and the 125 calls?

 

yep.

 

Well, with the hedges , it looks like your breakeven points are $109 and $119. A $4 move does not seem like a lot on BIDU.

 

Your numbers aren't correct.

first there will be an IV collapse.

next remember that if I get a 10 pt move, yes the straddle will be slightly underwater (remember I sold it at 9.70, so it almost entirely accomodates that move in either direction towards the hedge) ... but the hedge (at 105, for example) will be worth a bit more.

My dream would be an open at 80 tommorow, to close out the calls. Then wait til Fri for a recovery to 115 or above (for the puts).
Alternatively an open at 115 will be great.

 

Sorry, I had $9.10 credit for the Straddle (that's what TOS gave me). With $9.70 and a 30% IV crush (does that seem reasonable), your breakeven points are $105.50 and $124. Losses increase real fast below/above those ($5,500 at $100 for a max profit of $4,300 at $115).

 

$9.10-$9.20 is what you would get right now for the Straddle.

 

yeah it seems like the price is coming down since everyone is doing it. sold em earlier today. started at 9.80 and last ones i sold were 9.50.


btw, i liked your ntri idea. i am testing it out. sold 5 Mar 45, buy 5 Feb 45.

but losses aren't too bad past the hedge point since my hedge ratio is 1:1.... i'd really like to hold this thing til expiration, and may be forced to if I never get a brush past 115 during the next 2 days.

 

Good luck on it, I will be watching. I am doing the Mar $40's and Jun $40's on NTRI. Hoping for a big IV crush there.

 

I also sold some Jun 50, bot Mar 50...

We'll compare results....

i am wondering if theta crush might defeat IV crush on my NTRI feb/mar angle.