Trade Idea – LinkedIn Short Strangle

Trading Volatility

 

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

 

 

 

 

 

 

 

 

TRADE IDEA:

 

– 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.

1 Comment

  • jordan

    Reply Reply December 12, 2012

    How wil you adjust this trade

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