Jan25 stock at 186ish at opex so the you collect the full value of the short put and short call if you held all the way and the May 190 call is nearly unchanged. so about a $200 winner on mikes trade. im sticking with my suggestion #1 from below since the may190 call is unchanged... sell either the May 195 for $4+ or May 200 call for nearly $3 still, to bring in more premium and lower the cost basis. or sell the Feb 190 short call for about $2 in premium turning this into a calendar. don't let this $200 winner turn into a loser. point being the trade is not over just because 2 of the 3 options are not on the board anymore. you have to manage that may190call. you need stock at 196ish at may opex to just be flat with todays results. consider that. im by nature a premium seller so im always trying to limit my debits or bring in credits on trades.
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Jan20 - haven't seen this trade structure on air before. the sell strangle/buy longer dated call or the sell calendar/ sell put trade. don't follow and have never traded UNP but some comments on the trade. here is the video clip from the show UNP clip
using after hours data on MLK day. stock at 185ish. expected earnings move is $6, Mike is :
Selling the Jan 24 177.50 put (collecting .78)
Selling the Jan 24 190 call (selling the put and call makes is "selling a strangle") - collecting $2.25 total
using that money to Buy the May 190 call for $6.70 (total outlay is $4.45 debit)
$445 is not exactly cheap for a bullish upside call. risk less make more. also discussed by tony was you can consider this selling a calendar(sell the jan24 190 call/buy the may190 call) and selling a put. as I type the IV for the jan24 call is higher than May which is should be but not super elevated. IV for Jan is in the 30's, likely be higher on earnings date. the difference of Jan IV to May IV is less than 20points. does not make me interested in selling premium at all on this stock. for example, NFLX IV is 60+ for the earnings week and 30+ difference to the Apr option.
suggestions:
1. if you absolutely positively have to do this trade, consider also selling the May 200 call for $3 turning that May position into a call spread and reduces the total debit to about $1.45, max profit above 200 in may is $8.55 ($10 from the spread - the 1.45 from debit). you can also sell additional 190 short calls for Feb, Mar for further credits if you get a move higher. remember since you are selling at put, you need that buying power/margin to do that.
2. if you absolutely positively have to do something similar, consider just selling the strangle (if you have the buying power/margin to sell naked calls). don't buy the May call option. Collect the $2.25 premium. your breakeven at opex is 175.25 downside (177.50 put-2.25premium) and 192.25 upside (190call +2.25 premium). you profit in that range. no ifs and or buts, close this strangle the day after earnings. Then if there are compelling results or commentary look to put on something for May opex
3. if you don't have much buying power (enough to sell that put), consider just doing the calendar portion. delete the 177.50 put sale, but will raise your debit to $5.23
4. No trade(my choice). nothing compelling here, not enough premium. Spending $445 per lot does not get my attention. I prefer to be a premium seller or spend minimal dollars for a directional trade. lets see how it works out
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