Monday, July 22, 2013

Friday, July 20 - Expiry Strangle Setups

On Friday, July 20:

I was still away on vacation, but was paying some attention to the market. There was some good price action in Google, ISRG. When I say good, I mean the price action set-up for some nice high-probability non-directional plays. The safest way to play them is with the straddle, but the return is less. I prefer strangles when I'm expecting some volatility to come into the trading day. The strangle has more risk than a straddle, but it also has a lower initial outlay and a better payout if you get the volatility you're expecting.

$GOOG 875/895 strangle - The stock looked to open around 885 and I figured it was good to move >$10 on the day. It was and it traded to a high of $902 on the day. The strangle could have been put on right off the bat for about 4.00 and taken off for around 8.00.

$ISRG 355/375 strangle - I liked this because I didn't think the market had accurately priced the stock and I expected some volatility throughout the trading day. Sure enough, the stock traded down to 356 only to rebound to 392 by the end of day. The strangle could have been put on for about 3.00 around the open and taken off for 14, or 18 if you waited until the last second of the day.

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