Linkedin has made a nice move upwards. Its up over 20% in the last month, and is hitting the upper Bollinger band today. Both factors combined produce this Trade idea – Linkedin short strangle
– LinkedIn should turn back to come well into the Bands again.
– However, the momentum is still up (look at the MACD in the chart 1 above)
– Therefore a safer strategy is a Short Strangle at (Jan expiry) 115 Call and 110 Put
– Credit of $7.9, Max profit of $7900, Margin 21K (33% return in 38 days)
– The credit and Margin is very favorable which is one of the reasons for the trade
– Breakevens at 102 and 123 , creating a $21 profit range (Chart 2 above)
– Position is designed with a Negative delta bias because of Bollinger band reading
– Trade holding time is approximately 3 to 4 weeks.
Please post your thoughts on this trade.