Update 2/24/2022: I exited my bear call vertical options spread on LYFT, 22 days before expiration, for a $0.32 debit per contract/share, a profit before fees of $76 per contract. Shares were trading at $38.14, down $1.63 from the entry level.
The Implied Volatility Rank at exit was 49.8, down 51.3 points from the entry level.
The price dropped after earnings were published, and after analyzing the chart, I decided to hold longer in the expectation of further decline. I exited at 70% of maximum potential profit, well above my usual earnings-play target of 25% of max.
Shares declined by 4.1% over 16 days for a -94% annual rate. The options position produced a 237.5% return for a +5,418% annual rate.
I have entered a short bear call options spread on LYFT, using options that trade for the last time 38 days hence, on March 18. The premium is a $1.08 credit per contract share and the stock at the time of entry was priced at $39.77.
The Implied Volatility Ratio stood at 101.1%.
|LYFT-bear call spread||Strike||Odds||Delta|
The premium is 43.2% of the width of the position’s short/long spread. The profit zone covers a 15.9% move to the upside and an unlimited move to the downside.
The risk/reward ratio is 3.6:1, with maximum risk of $392 and maximum reward of $108 per contract.
How I chose the trade. The trade was placed to coincide with LYFT’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincide with the expected move of $5.41 either way, based on options pricing, which gives a price range of $44.56 to $33.74.
By Tim Bovee, Portland, Oregon, February 8, 2022
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.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.
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