Strangling IOC Again

Just a quick note to say that I’ve put on the May 60/70 put/call strangle, netting around $12.  It can be done at the bid prices simultaneously for $11 net proceeds.

If you don’t understand the first sentence, then you probably shouldn’t follow this strategy.

What it means, by the way, is that I sold $60 puts and $70 calls for $12 proceeds.  If the stock closes third week in May between $60 and $70, I keep all the money.  To lose money, it has to close below $48 or above $82.

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3 Responses to Strangling IOC Again

  1. IOC has been tremendously volatile. Why do you think it’ll stay within that range over the next 2 months? Put another way — you did this for a $12 price; at what price would this trade no longer interest you?

    • hhill51 says:

      I think where it’s bid now — under $10, is a bit rich. The trade has 53 days left in it, so the implied vol at $12 happens to be higher than the observed 74%, and the $9.50 bid happens to be around 71% implied vol.
      The funny thing is that I didn’t bother checking the Greeks before putting the trade on.

  2. nm09 says:

    I think your IOC 60-70 straddle idea is great because the constant
    short attacks seem to be producing less drastic down movements
    and the chances of a home run event soon seem to be waning.
    I sold 55-85 May straddles at about 6.60 credit. but my break even
    points are not much better than yours. The option book writer
    Charles Cottle argues that short straddles are never worse then short
    strangles, but it is psychologically more comforting to have wider
    short options. I think I need to change my thinking. If the Papua
    New Guinea natives eat the IOC drilling crews, all bets are off.

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