No. of Recommendations: 0
The IV collapse on BGEN happened as expected. The original position was
a long iron butterfly, which is another way of saying the play consisted
of two credit spreads: The credit spreads are a Bull Put Spread and Bear
Call Spread. Because I perceive the greatest risk to be to the upside,
the decision was made to lock-in profits on the Bear Call Spread by selling-
to-close the short leg and to keep the long call as a lottery ticket.
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| Action Num OptSym Expire Strike Type Entry Current |
| ---------------------------------------------------------------|
| Buy-to-Open 10 BGQDL APR02 60 Call @ 0.65 0.05 bid |
| Sell-to-Open 10 BGQDK APR02 55 Call @ 1.80 0.40 ask | «-----
| Sell-to-Open 10 BGQPI APR02 45 Put @ 1.05 0.10 ask | |
| Buy-to-Open 10 BGQPH APR02 40 Put @ 0.50 0.60 bid | |
| | |
| Buy-to-Close 10 BGQDK APR02 55 Call @ 0.40 $1.40 profit | «-----
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| Before and After Considerations |
|-------------------------------------------------|
| Breakevens Original Current |
| Downside $43.30 $43.70 |
| Upside $56.70 None |
| |
| Net Credit $1700 $1300 |
| |
| Max Risk $3300 $3700 |
| Max Reward $1700 Unlimited |
| |
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Other concerns: The QCOM Ratio Backspread isn't working out as
anticipated. Theta is taking its toll by currently costing $34 per day
and the rate-of-decay will begin to accelerate because there are less
than 30 days till expiry. Because QCOM is trading right at the max loss
inflection point I'll hold the backspread for awhile longer so that the
maximum loss can be reduced.
