If I assume the volatilty on RNVS will fall after 10/26, and I can't follow watch my trades all day (I'm not a full time trader), then would an appropriate trade to for this be to enter a butterfly?
Sorry - should have stated this; thanks for asking. I'm assuming the IV will fall, and the stock will stay near to where it is currently trading. So, if I'm really asking, if I assume the stock is going to trade in a fairly narrow range until the Nov expiration, and the IV as high, then would this be an appropriate strategy to capture the high IV?
Market's pricing in a ~$9 move. Of course that is if you believe the market's right. Personally I'd fly or condor, but those IVs makes one think twice. Just reread your post again, and yes a fly/condor is good for that situation. You do know there is drug test results due out on this no?
jj90 - thanks for the response! Was aware of the upcoming conference call 10/26, but not the nov drug info, so thanks for that too! Had originally thought of a straddle, since the high IV certainly implied a large amount of uncertainty and potential move, but then felt like the high IV would fall after the 10/26 conference; looks like I was probably attributing the high IV to the wrong event, so maybe the condor isn't too bad an idea after all.....
How does a 10/15/20 Iron Butterfly sound? Max profit at 15 is 4.35, max loss is .65. B/E points at just below 11 and just above 19. Edit: Note these are TOS midpoint prices.
jj90, when you said Market's pricing in a ~$9 move. , how did you determine this value? I don't know how to do that.
With RNVS currently trading around 14.75.. Using TOS for risk analysis for condors, comparing a condor built using calls vs puts: Nov call 12/15/17.5/20, the TOS midpoint is around .45 debit. Approx profit would be $200, vs a max loss of $45. It appears like a simular risk graph is associated with a Nov put 17.5/15/12.5/10 has a debit of .10. Approx profit would be $250, and mx loss would b $0. I understand I may not be able to execute the trades at those values. My questions is actually concerning the risk. Is one of these inheritantly more risky then the other?