PCLN Earnings Play

11/5/13

This is an earnings play on PCLN. We got in a little early because the premium was so good. IV for the NOV2 weeklys is 78% and should drop to around 34% after earnings on 11/7. The expected move of 65 points by expiration is shown on the risk profile.

• Iron Condor, PCLN @ 1079.78
• STO Nov2 1145 C (78% OTM)
• BTO Nov2 1150 C
• STO Nov2 995 P (87% OTM)
• BTO Nov2 990 P
• Credit = 1.80
• Risk = 320
• ROR = 56% in 3 days

Update: 11/7/13

Earnings for PCLN are being reported after close today. In anticipation PCLN hit a low of 1020.69 and closed at 1022.89.

Worried about the expected move blowing past our put spread we hedged by selling another IC wrapped around the current price.

• Iron Condor, PCLN @ 1022.89
• STO Nov2 1095 C (81% OTM)
• BTO Nov2 1100 C
• STO Nov2 965 P (65% OTM)
• BTO Nov2 960 P
• Credit = 2.10
• Risk = 290
• ROR = 72% in 1 day

This helped our position 2 ways. First, it lowered our BE slightly from 993.20 to 991.10. But, more importantly, it reduced my risk in the 965 to 995 price range from -320 to -110. Of course, if PCLN continues to tank, my total risk has increased. Here's the summary for my PCLN position:

• Net = 180 + 210 = $390
• Total Risk = 320 + 290 = 610
• ROR = 390 / 610 = 64%

Update: 11/8/13

Placed GTC orders to buy back all 4 short positions for a nickel, just in case. PCLN gapped up over 33 points at open and finished the day at 1073.20.

• BTC Nov2 965 P
• BTC Nov2 995 P
• BTC Nov2 1095 C
• BTC Nov2 1145 C
• Debit = -0.20
• Net = 390 - 20 = $370
• ROR = 370 / 610 = 60% in 3 days

Closed.