PCLN Iron Condor

10/2/13

Today was our first meeting of the Humpday Traders.

This first trade started with a recommendation from Dinger.

PCLN @ 1067.00
STO NOV 1205 CALLS for a nice credit.
If you can't go naked or don't want to....you could consider:
STO NOV 1205 C and BTO NOV 1220 C for a solid credit.

After looking at the chart, we see that the current IV percentile is 50% compared to the past year, 77% for the past 4 months, and 100% for the past month. As a side note, TastyTrade is now referring to 'current IV percentile' as 'IV rank' in order to avoid the confusion with current IV. With the monthly IV rank at 100% we can cash in on the high premiums by add a credit Put spread to Dinger's Call spread to create an Iron Condor. The high IV rank also allows us to move farther OTM to the 90% strikes. This morning with PCLN @ 1056 I placed an order to sell an IC for $1.70.

• Iron Condor, PCLN @ 1056
• STO -1 Nov 1210 C
• BTO +1 Nov 1220 C
• STO -1 Nov 895 P
• BTO +1 Nov 885 P
• Credit = 1.70
• Risk = 830
• ROR = 170 / 830 = 20%

Here's what the Risk Profile looks like a week from now. I should realize 50% profit by 10/20 without any price movement. The POT is 11% for the short Put and 13% for the short Call.

Update: 10/10/13

Our entry point is represented by the vertical yellow line. The recent big swings has increased IV, hurting slightly.

Note that I was filled in 5 contracts, not just 1. The IV increase has juiced the premiums and wiped out any gains, but look at that theta.

Update: 10/23/13

PCLN reached a high of 1098.70 yesterday and then fell back. It opened today at 1073.48 so I decided to close out early and lock in 1/3 of the potential profit.

• BTC Nov 1210/1220/895/885 C/P @ 1.10
• Net = 170 - 110 = $60
• ROR = 60 / 830 = 7% in 20 days

Closed.