Orexigen (OREX) - Trading a Bio-tech and FDA News

OREX is trading $5.38, down 3.8% with IV30™ up 3.1 to 293.11%. The LIVEVOL™ Pro Summary is below.



This is a bio-tech with major event news coming soon. It's another weight loss drug so see VVUS and ARNA for their stories. OREX's new weight loss drug will be reviewed by a panel of FDA experts on Tuesday Dec. 7. Cathy Clay brought this to my attention and Michael Rubin helped in the research.

The FDA will release some review documents and staff comments on the new drug on Friday Dec. 3 previous to the panel.

Some news:
-----------------------------------
SAN DIEGO (TheStreet) -- Orexigen Therapeutics(OREX_) brings its weight-loss drug Contrave to a panel of experts convened by the U.S. Food and Drug Administration on Tuesday, Dec. 7. Here's what you need to know:

It's difficult to place odds in Orexigen's favor given the bad outcomes of the previous weight-loss drug panels and FDA's obvious concerns about the long-term safety of drugs like these. Still, Orexigen's advantage is having the third weight-loss drug reviewed by FDA behind Vivus and Arena. Orexigen should have learned enough from the previous panels to put together a presentation that answers the obvious safety questions that will be raised and argues strongly for Contrave's approval.
Source: Click to read article from TheStreet.com
-----------------------------------

Alright, alright, enough of that... Let's look to the vol chart to start. IV30™ is red, HV20™ is blue and HV180™ is pink.



So the vol has ripped up, had a bit of a dip there, but is now rising into the news.

I wrote a few times about HGSI, selling the meat and covering with the wings turned out to be a very nice winner, but ya know, bio-tech is bio-tech...

Let's look to the Options Tab below.



Dec vol is 380 compared to just 240 for Jan, so the options market reflects a pretty high certainty that the news is coming out this cycle.

The Dec 4 puts and Dec 9 calls are worth about the same, so the option market reflects about equal odds that this thing goes below $4 or above $9 (I know that's not quite true, the real-world probability measure is skewed to account for infinite upside, but you know what I mean).

Possible Trades to Analyze
1. Bet on a muted move, like HGSI:
Sell the Dec 6 straddle @ $3.70
Buy the Dec 3/9 strangle for $1.15
This yields a $2.55 credit (Max Gain) and a $0.45 Max Loss, or a 5.67:1 ratio. If OREX stays in the range ($8.55, $3.45) at Dec. expo, this is a winner.

2. Go to Jan for the bet on a muted move:
Sell the Jan 6 straddle @ $3.95
Buy the Jan 2.5/9 strangle for $1.25
This yields a net credit of $2.70 (MaxGain). MaxLoss is $0.30 to the upside but $0.80 to the downside. I've included the PnL chart for this one.



3. Bet on a big move up:
Buy the Dec 7/11 call spread and pay $0.95. That's a $3.05 MaxGain to $0.95 MaxLoss or ~3.2:1 ratio.

An alternative is the 8/11 call spread for $0.50 if possible, that's a 5.5:1 MaxGain:MaxLoss ratio, though it requires OREX pop passed $8.5 which would be 58%!

4. Bet on a smaller move up:
The Dec 6/8 call spread for $0.55 seems reasonable. Note that the Dec 4/6 put spread is $1.40 and the Dec 3/5 put spread is ~$1.20. Yikes...

5. For you risk lovers, a Dec 5/8/11 long x short x short call spread costs $0.40 to try to make $2.60 but is naked upside after $11. It doesn't lose until OREX shoots passed $13.60. Naked options in a bio-tech is very risky...

6. Do nothing, just watch...

This is trade analysis, not a recommendation.

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BJ's Wholesale (BJ) - Time Spread on Takeover

BJ is trading $46.44, up 0.4% with IV30™ down 1.0%. The LIVEVOL™ Pro Summary is below.



The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price >= $5
Sigma1 - Sigma2 >= 8
Average Option Volume >= 1,000
Industry != Bio-tech
Days After Earnings >=5 <=70
Sigma1, Sigma2 >= 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol Pro™.



It's also available on the Scanner Tab, in the "Trading Opportunities" folder. I've included that snap as well (below).



The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

On 11-10-2010 the stock gapped up more than $5. Here's a news snippet from Forbes:
-----------------------
Shares of BJ's Wholesale Club are higher on Wednesday on news that the company has put itself up for sale.

The company received a buyout offer from private equity firm Leonard Green & Partners, prompting it to hire Morgan Stanley to conduct an auction process for the company.
Source: Forbes.com. Click to read
-----------------------

Tricky...

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).



I've highlighted the vol difference between the Dec and Jan 45 and 47.5 strikes.

Finally, let's look to the Options Tab (below).



Potential Trades to Analyze
1. Sell the Dec 45/47.5 strangle and purchase the Jan 45/47.5 strangle. This yields a net debit of ~ $1.60 with ~6 point vol scalp. The risk of course, is that the takeover is announced, or rumored, and BJ pops while back month vol collapses. Being long the back month is long vega, so a vol drop is a risk.

2. Do #1, but only purchase the Jan 47.5 calls. This actually yields a $0.20 credit, but is naked short options to the downside. The bet here would be that the stock price is safe to the downside for the rest of this options cycle as the potential takeout acts as a floor to the price.

3. A little more tricky, Sell the Dec 45/50 strangle @ $1.35 to purchase the Jan 47.5 calls for $1.90. That's a $0.55 debit, naked downside again but does win to a takeover because of the off-set strikes.

This is trade analysis, not a recommendation.

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Hewlett-Packard (HPQ) - Vol Rising

HPQ is trading $42.22, down 2.3% with IV30™ up 11.3%. The LIVEVOL™ Pro Summary is below.



I found this stock using a custom scan I built searching for names where IV30™ is up at least 10% today. The scan details are below with a snapshot if you want to build it yourself in Livevol Pro.

Custom Scan Details
Stock Price >= 10
Average Option Volume >= 1,200
Days After Earnings >= 5 and <= 60
IV30™ Percent Change >= 10%
IV30™ >= 10

The goal here is to find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.



The HPQ Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



IV30™: 27.31
HV20™: 24.69
IV180™: 27.84

We can see the IV30™ rose into earnings (as expected) then fell. Today it's pointing back up and is almost as high as the HV180™ (long-term realized) and is a few points passed the HV20™ (short-term realized).

The Skew Tab snap (below) illustrates the vols by strike by month.



The skew looks pretty normal, though the upside does bend up a bit. Finally, let's look to the Options Tab.



Possible Trades to Analyze
1. Sell the Dec 42 straddle if you want sell naked vol. It looks like the straddle can be sold @ ~$2.11. I'm not in love with this trade. I'd rather sell 30+ vol in HPQ.

2. Do trade #1, but purchase the 41/43 strangle for $1.28. This is a fancy little bet that risks $0.17 to make $0.83, but has a small probability of success. I've included the PnL chart for this trade below.



Assuming a log-normal distribution of stock returns, back of the envelope calcs yields ~ 10% probability that the stock is in the range ($42.17,$42.83), which is the range necessary on Dec expo for the trade to be a winner. In other words, if the stock moves at the current vol, this doesn't look real good.

3. The markets are nice and tight on this stock, selling the downside seems reasonable since those vols are in the 31+ range.

This is trade analysis, not a recommendation.

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Las Vegas Sands (LVS) - Elevated Vol, Popping Stock & GDP Revision

LVS is trading $50.35, up 0.6% with IV30™ up 10.2%. The LIVEVOL™ Pro Summary is below.



This stock is up ~85% over the last 3 months. The revised GDP report last week demonstrated the consumer spending ticked up nearly 3%. Keep in mind the US consumers represent 70% of GDP. That ~3% jump was the fastest growth since Q4 of 2006 according to an article I found on Fool.com. Click Here for article.

The article goes further to discuss institutional buying of the stock. Finally it mentions a Barron's article:
"On the sentiment front, there was an optimistic cover story on the retail sector in Barron's last weekend, the first such bullish piece that we have seen in a long time."

Ok, enough with that stuff. As of today LVS vol has popped passed HV20™ and HV180™. Specifically:

IV30™: 61.46
HV20™: 54.51
IV180™: 54.99

The LVS Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



I've highlighted the popping IV30™. Note also the gap up on earnings back in the end of Oct.

The Skew Tab snap (below) illustrates the vols by strike by month.



Note that LVS has weeklies. We can see a parabolic shape in the weekly and Dec monthly options. The upside is less pronounced in the Jan options, though it's slightly bid as well.

Finally, let's look to the Options Tab.



Possible Trades to Analyze
The one week straddle is priced at ~ $2.68 fair value... One week?...

1. Sell the Dec 3 weekly 50 straddle @ 2.65. This sells 62 vol.

2. Do #1, but purchase the Dec monthly 52.5 calls for $1.86. This yields a $0.79 credit and has no upside risk. Of course, the downside is naked short options.

3. Do #2 but add a Dec weekly 49 put for $0.78. Net, this trade yields $0.01 credit, looks for upside moves in LVS after Dec 3 and snips the margin cost of #2. This trade loses pretty big if LVS goes down in the next week. Protection obviously starts at $48.

4. Sell Dec weekly 48 put @ $0.47. This sells ~63 vol and bets that the stock holds up for the next five trading days. This is sort of a bet that the long institutional holders prop the stock up in the short-term while taking advantage of elevated vol. The Dec weekly 49 puts are a similar bet.

This is trade analysis, not a recommendation.

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Crocs (CROX) - Depressed Vol on Moving Stock

CROX is trading $17.61, up 4.2% with IV30™ down 5.0%. The LIVEVOL™ Pro Summary is below.



I found this stock using a real-time custom scan. This one hunts for low vols.

Custom Scan Details
Stock Price >=$7 and <= $70
IV60™ >= 1
IV60™ - HV60™ <= -8 and >= -40
HV180™ - IV60™ >= 8
Average Option Volume >= 1,200
Industry != Bio-tech

The goal with this scan is to identify intermediate-term implied vol (IV60™) that is depressed both to the intermediate stock movement (HV60™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume) and want to avoid bio-techs (and their crazy vol).

The CROX Charts Tab (vol only) is included (below). IV60™ - yellow vs HV60™ - blue vs HV180™ - pink).



We can see:
IV60™: 47.06
HV60™: 58.43
HV180™: 58.76

So, IV60™ is depressed relative to the intermediate term and long term realized movement of the stock. I mean, what a CROCS! Ha... What, not funny?... It was my timing, right?... It's always my timing.

Moving on... Finally, let's look to the Options Tab (below).



Possible Trades to Analyze
1. Though we're lookin at IV60™ (which is more like Jan), the Dec ATM straddle is actually priced at ~48 vol. Purchasing the Dec 17.5 straddle for $1.65 requires that CROX expire out of the range [$15.85, $19.15] if the position is held to expo. The stock has moved ~$0.80 just today. That's ~half the straddle value.

2. Purchase the Jan 17.5 straddle for $2.80. Yikes, that feels like a lot of premium, though it is depressed vol to the HV measures.

As I've said on prior posts, another approach is wait for this holiday break to pas by, and look at the prices and vols on Monday of next week. If the trades like better, maybe it's a do, but owning that decay over this dead period feels icky...

This is trade analysis, not a recommendation.

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SourceFire (FIRE) - Calendar Spread on Stock Collapse

FIRE is trading $27.74, up 1.4% with IV30™ down 1.5%. The LIVEVOL™ Pro Summary is below.



The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price >= $5
Sigma1 - Sigma2 >= 8
Average Option Volume >= 1,000
Industry != Bio-tech
Days After Earnings >=5 <=70
Sigma1, Sigma2 >= 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol Pro™.



The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).



We can also see a particulalry large vol difference between the Dec/Jan 35 calls.

Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



We can see the total collapse on the last earnings release. The stock gapped down ~ $8. Here's a news snippet from Fool.com:

---------------------------------
The third-quarter report Sourcefire filed last night was better than expected, but the outlook for the fourth quarter was far weaker than the average analyst was hoping for. The maker of the Snort intrusion detection software package says revenue should inch up slightly in the next period while earnings drop from current levels.
Source: http://www.fool.com/investing/general/2010/10/28/sourcefire-shares-plunged-what-you-need-to-know.aspx
---------------------------------

So, good results, but outlook not as bright as was anticipated.

Finally, let's look to the Options Tab (below).




Potential Trades to Analyze
1. Sell the Dec 25/30 strangle @ $1.80, buy the Jan 25/30 strangle for $3.50. That's a net debit of $1.70, sells ~68 vol and purchases ~63 vol.

2. If you think there's upside to this stock, a Dec/Jan 35 call spread costs $0.50, and sells 78 vol to a ~65 vol purchase. This is also a trade that would benefit from a "January Effect," which you may or may not subscribe to...

3. If you think the downside is over stated now that the stock has rallied, selling the Dec 22.5 puts @ $0.30 or better sells ~72 vol against HV180™ (long-term realized trend) of 61.58. A Dec/Jan 22.5 put spread might also be worth looking at, as it sells ~ 8 vol points higher than it purchases.

NB: With these wide markets, if you can't get good fills that are inside NBBO on both sides of a spread by at least $0.05, then this might just be a "pass" as a trading vehicle.

This is trade analysis, not a recommendation.

Legal Stuff:
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Hallibuton (HAL) - Depressed Vol Starts to Rise

HAL is trading $36.35, down 2.6% with IV30™ up 4.5%. The LIVEVOL™ Pro Summary is below.



I found this stock using a real-time custom scan. This one hunts for low vols.

Custom Scan Details
Stock Price >= $7
IV30™ >= 1
IV30™ - HV20™ <= -8 >= -40
HV180™ - IV30™ >= 7
Average Option Volume >= 1,200
Days After Earnings >= 32
Industry != Bio-tech

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol Pro™.



The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not purchasing depressed IV30™ relative to HV20™ simply because of a large earnings move.

The HAL Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



We can see:
IV30™: 38.04
HV20™: 51.51
HV180™: 46.51

So, IV30™ is depressed relative to the short term and long term realized movement of the stock. We can glance at the Skew Tab below. I've only included Dec.



So, a normal looking skew. Finally, let's look to the Options Tab (below).



Possible Trades to Analyze
Ok, this is really hard for me because I hate buying premium, but here goes.

1. Buy the Dec 36 straddle for $2.88. This purchases ~ 38.5 vol. Keep in mind though, buying Dec vol buys a Thanksgiving break and a relatively slower period in the market. So, buyer beware.

2. Do #1, but sell some of that elevated vol to the downside per the skew chart. Maybe Sell 2 Dec 33 puts @ $0.40 to bring the net debit down to $2.08. The Dec 33 puts are priced at ~ 42.5 vol. One note here, this leaves a pretty small max gain to the downside...

3. Ok, here's a crazy idea. Do the complete opposite. Sell the Dec 36 straddle @ $2.83 and purchase the Dec 35/37 strangle for $1.99. This yields a net debit of $0.84 (MaxGain) with a MaxLoss of $0.16 for 5:1 (ish). Of course, the PnL window is extremely tight. On expo HAL would have to be in ($35.16, $36.84). Someone check that math...

4. A final idea here is to wait for Thanksgiving to come and go and see if any of these trades make better sense next Monday.

This is trade analysis, not a recommendation.

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STEC (STEC) - Call Skew Bends; Calls Bid on Rumors... Again

STEC is trading $16.04, up 4.4% with IV30™ also up 2.3%. The LIVEVOL™ Pro Summary is below.



The company has traded over 10,500 options in the first half of the day on total daily average option volume of just 8,163. Calls have traded on a 6:1 ratio to puts with the action in the front month 16, 17 and 18 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are trading about the size of OI. The Dec 18 calls look like long OI so this is a double down in my opinion. The vol and skew is up, there are premium buyers out there.



The Skew Tab snap (below) illustrates the vols by strike by month.



The skew is big time parabolic ("big time parabolic?"). OTM calls are bid. I've noted a relatively large vol difference between the Jan 19 and Dec 19 calls (it's even wider in the 20 line).

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



We can see the stock had climbed for a while, then gapped up on earnings and lately has actually dropped. IV30™ looks fair(ish) relative to HV180™ (i.e. the long-term trend of stock).

Possible Trades to Analyze
1. Month to Month Spreads:
Buy the Dec/Jan 19 call spread and pay $0.29. This purchases 55 vol and sells 61 vol.
Buy the Dec/Jan 20 call spread and pay $0.23. This purchases 56 vol and sells 64 vol.

2. Do a skew trade intra-month. Buy the Dec 16 calls for $0.94 and sell the Dec 19 calls @ $0.21. That's about an 8 vol point scalp for a call spread.

3. I like the spreads here if it's selling the elevated skew and not paying too much premium as this is name tends to bend up on rumors that don't materialize. And yes, I know I just analyzed call spreads... lol.

This is trade analysis, not a recommendation.

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Yahoo! (YHOO) - Elevated Vol, Takeover Still In Play

YHOO is trading $16.43, down 0.8% with IV30™ down 0.8%. The LIVEVOL™ Pro Summary is below.



I found this stock using a real-time custom scan. This one hunts for high vols. I wrote about YHOO on 11-15-2010:
Yahoo (YHOO) - Elevated Vol Rising

And on 11-9-2010:
Yahoo (YHOO) - Takeover Rumors Push Vol and Skew

Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching. The YHOO Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

 

We can see:
IV30™: ~39.46
HV20™: 27.32
HV180™: 31.24

So, IV30™ is elevated relative to the short term and long term realized movement of the stock. The risk here for YHOO is to the upside as reflected by the options. Let's look to the Skew Tab for Dec.



So substantially bid to the upside which is the opposite of "normal." To read about Option Skew, why it exists and what "normal" is, you can click here:
Understanding Option Skew

Let's look to the Options Tab (below).



Possible Trades to Analyze
1. Selling the vol naked is a possibility, though risky with the takeover possibility, or even more likely, the risk of a takeover rumor. Having said that, a Dec 16 straddle sale @ $1.25 yields some premium to play with.

2. Sell the Dec straddle to purchase 2 Dec 17 calls and 1 Dec 18 call for $1.21, or a net $0.04 credit. Or, in other words, buy the takeover "bet" and cover commissions while taking on downside risk. I don't love this trade, but I do like the sentiment... Try this...

3. Sell the Dec 16/17 strangle @ $0.86, purchase 5 Dec 19 calls for $0.17 or $0.85 total. This yields a net premium of $0.01, and gives a huge win if YHOO gets the takeover bid for $20 or above. But, if YHOO trends up to $18-$19 and sticks, this trade is a big loser.

4. Sell the Dec 16/17 strangle @ $0.86 and purchase 2 Dec 18 calls for $0.54. This yields a $0.32 credit and wins to a takeover while trimming the upside risk if YHOO pins to the long strike.

NB: All of the trades above ignore downside risk... This was a $14.43 stock just a few weeks ago, so, ya know, downside is in play too.

This is trade analysis, not a recommendation.

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Brocade (BRCD) - Scalping the Skew For a Small Bet

BRCD is trading $5.80, up small with IV30™ up 2.2%. The LIVEVOL™ Pro Summary is below.



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I posted an article on this reverse skew on 9-7-2010.
Brocade (BRCD) - Stock Up, Vol Pops & Skew Goes Backwards on Takeover Rumors

Today Cathy Clay of the Livevol Strategy Group pointed out that the Dec 6/7 call spread is going for crazy cheap (in my opinion) in a takeover stock with earnings in the Dec cycle. Let's look to the Skew Tab first (below).



So the Dec 6 calls are priced at 53.5 vol and the Dec 7 calls are priced at 68 vol. Even better, BRCD has earnings in the Dec cycle and the 6 strike is the ATM. The cherry on top?... The markets are a cab ($0.01) wide.

The Options Tab (below) illustrates the prices.



Possible Trades to Analyze
1. Buying the Dec 6/7 call spread for $0.17 seems like the bet here. It's a small bet with a MaxGain:MaxLoss of 4.89:1. It scalps skew in a call spread, trades on tight markets, buys earnings vol ahead of the rise and has the added benefit of a possible takeover (or takeover rumor).

The fact that it's this cheap actually implies the likelihood of the stock going to $7 is pretty low... Just to temper expectations...

This is trade analysis, not a recommendation.

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WellPoint (WLP) - Examining Health Insurer Elevated Vol

WLP is trading at $57.34, up 1.8% with IV30™ up 11.0%. The LIVEVOL™ Pro Summary is below.



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I found this stock using a real-time custom scan. This one hunts for high vols. Note that HUM reported earnings yesterday (or whatever) and it wasn't good. A quick snip from a news story below:

------------------------
HUM projected sharply lower profit next year as it expects more Americans to return to the doctor's office and sees lower margins in its Medicare plans.

Humana's outlook was the first detailed view of 2011 from the major U.S. health insurers, whose results have consistently topped expectations this year, and includes a projected impact on implementing a new U.S. healthcare law.
(Source: Reuters)
------------------------

Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching.

The WLP Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).





We can see:
IV30™: ~36.78
HV20™: 22.90
HV180™: 28.66

So, IV30™ is elevated relative to the short term and long term realized movement of the stock. We can also the stock has moved from ~$48 in early Sep to now over $57.

Let's look to the Options Tab (below).



Possible Trades to Analyze
1. Sell the Dec ATM (57.5) straddle @ $4.70 (ish). This yields a profit on Dec expo if WLP is in ($52.80, $62.20). Of course, this can be shut down early for a win if the stock sticks around here and vol drops, or it just wins to time decay.

2. Do #1 above, but cover with a strangle; like the Dec 55/60 for $2.60. That yields a $2.10 credit (MaxGain) with a MaxLoss of $2.90. It wins on Dec expo if WLP is in ($55.40, $59.60). I mean that seems decent...

3. If it's the downside that seems the riskiest, selling the 57.5 straddle @ $4.70 and purchasing the Dec 55 puts for $1.30 yields a $3.40 credit and wins to all stock prices below 57.5 (even a total collapse) and is safe to the upside up to $60.90. Above that level, it's naked short options.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
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