Wow, you can sell an iron butterfly/condor at nearly no risk on AMZN

Discussion in 'Options' started by demoship, Jul 24, 2007.

  1. 70/72.5/75 iron butterfly:

    Proceeds: 8.80 on sale of the 72.50 straddle

    Expense: 6.60 on buying the 70/75 strangle.

    This is assuming 10c slippage on every leg (40c total), and you're still getting a net credit of 2.20. If you get decent fills, you can probably get that up to 2.45.

    Numbers are similar for a 67.5 / 70 / 72.5 / 75 iron condor

    Just shows how ridiculous the volatility is on amzn.
  2. ssmegner


    Yes. But only about 17% probablity of making any money at expiration.

  3. It could be an ok way to play earnings, perhaps in concert with another position thats gamma positive. If you're just risking .30, figure that you'll make at least that much in profit by tomorrow if AMZN stays in the 70 - 75 range, since you'll benefit from an IV crush.
  4. Less if you figure the stock has to finish right on the strike price exactly to get the full max reward. Lowers the odds of success substantially. Low probability play with a high risk/high reward scenario. makes sense.

  5. Yeah, it seems like it could be decent as a quick play on IV...with everyone calling for a massive move in one direction or the other tomorrow, I'd take the .30 in risk for a cheap contrarian trade...

  6. just buy some puts and/or go short.

    everything is disappointing - hell, google sold off on a 3c miss. and if the stock doesn't sell off, then we're all screwed.
  7. jj90


    Now if only I went naked long calls on AMZN instead of a muted spread. I was gonna go long 55 puts on NTRI too. Hindsight is a bitch....