BBY is trading $34.46, up 1.7% with IV30™ up 4.6%. The LIVEVOL™ Pro Summary is below.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjC4dtvwRWNoQpAw8mmuO2HlZ3s1FR_oBvSxPpyjxnVemYXn3v6KUtc72NCOxzGxJfh_LqnVBTBofG_xZUixPhyphenhyphenx6X4Xf5AmZNWJ2MPXzpwo_xg-iCdhBcmwqgUmz4nfy-GtZ8AVpfyEPE/s400/bby_summary.gif)
BBY has earnings out tomorrow before the bell.
For the last eight quarters a sale of the BBY ATM straddle the day before earnings and a purchase the day after has been a winner eight times in a row, with a minimum gain of 32.5% and a max gain of 70.7%. The stats I derived from Livevol Excel are included (click to enlarge).
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPtpVM3sD6-Tmxl-f3IhNkRZlCl2b4edP2ckzudZ1rbDgl4QNOPaBMmwJ4uoc2O-WTR5vADn8shkRu1sbT9gwLsndkr846GScwi-CCnfoxsjZ96njqKlhBRw1RkWqT4kL6yQbLwK2zk6M/s400/bby_earnings.gif)
The front month vol is 78, the back month is 42. I have included the Skew Tab (click to enlarge).
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhttQTsJn_jbpAV8PA09sDqSuEugdspAna3AL2ELQEcVizFBhs0da86ge4GrhnDNAfYgfD3EwfwqJlpjmb81dc-5Vc8zdUGg0O2rju6ttQYgj8H0yoJ_Haay_OwHh3w-1wVb8UEB8nQpzU/s400/bby_skew_9-13-2010.gif)
Note how much higher the red curve is to the other months. This is not a mistake of course, with just 4 days to go to expo, the earnings event creates a weighted average of vols that is substantially earnings (1/4 days). The vol should be much higher in Sep as it is.
I see the Sep 34 straddle priced at $2.30. The The Options Tab (click to enlarge) is included below.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMekxCCsI_UV1QyfzZHrBnG2ccj8xf2KrI8ds7OmHdZf5XTeiS0Vb7gwJ0V4R8o1cZOlcjkB6EGdBO556PJUnvykDRUrCoNRDWhIGXAN5l5g7BffoLwRM9Acwj3zBl1nDpg7XmDBFl6mg/s400/bby_options.gif)
Trade to Analyze
Sell 1 Sep 34 straddle @ $2.30
Let's see what happens on close tomorrow.
A few things to keep in mind.
1) Market feels bullish lately.
2) I believe this is a huge earnings release for BBY as they project the holiday season.
Some alternatives to naked straddle selling are:
1) Sell the Sep straddle, Buy the Oct straddle (though this is long vega)
2) Sell the Sep straddle buy the 31/37 strangle. This yields a $1.80 credit with protection to both sides.
3) Sell a 34/35 strangle, buy a 33/36 strangle (or something like that).
4) Forget all this analysis, maybe you want to make a bet on direction and buy a call spread or put spread.
This is trade analysis, not a recommendation.
* UPDATE: Disclosure - I sold a Sep strangle and bought a Sep strangle further OTM.
Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html
No comments:
Post a Comment