How to play GOOG Earnings : Part-3
Recap :I reviewed directional option trading strategies in Part-1 then I discussed (OP reader Avi’s) one non-directional option strategy in Part-2. Now I am going to share another non-directional strategy i.e. backspread (Opposite of backratio) for Google earnings. Here is what the trade might look like:
- Sell x call GOOG Jan 470 and purchase 2x Feb call GOOG 510. Credit received is $855/backspread and margin required is $3145.
- The break even points are $478 and $540
- Here is the risk/reward chart –>
Just one of many more ways to play non-directional. Risks associated with this strategy are mainly two i.e. 1) if GOOG remains in between $478 and $540 by Feb expiration and if we don’t take any action we’ll lose money, and 2) When the volatility drops after earning annoouncement, it is going to hurt my long options.
If you would like to know about backspread, please click here Backspread
Cheers and good luck,
Profitable trading, OptionPundit