The athletic clothing designer and retailer Lululemon Athletica Inc. (LULU), headquartered in Vancouver, British Columbia, publishes earnings on Tuesday before the opening bell.
I shall use the JUL monthly series of options, which trades for the last time 39 days hence, on July 17.
[LULU in Wikipedia]
Click on chart to enlarge.
|LULU at 11:42 a.m. New York time, 30 days hourly bars|
|Week||SD1 68.2%||SD2 95%||Chart|
I'm moving to strangles for the first time in an earnings play. Think of them as iron condors without insurance to limit the potential loss.
The zone of profit in the proposed trade covers a $9.25 move either way. The biggest immediate move after each of the past four earnings announcements was $7.07, and the average was $4.39.
Probability of expiring out-of-the-money
The iron condor equivalent of the position, under my guidelines, would have a long call and long put as wings on either side of the short strikes, set $2.50 out.
For the strangle, the premium is $1.50. The stock at the time of purchase was priced at $61.96.
Decision for My Account
I've opened a position in LULU as described above.
-- Tim Bovee, Portland, Oregon, June 8, 2015
My volatility trading rules can be read here.
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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
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