Open: JEC Short Straddle Apr 40 w/insurance

I’ve been paper trading straddles for several months now and I feel I’ve learned enough to try one for real.   Jacobs Engineering looks range bound between $30 and $60 but hasn’t seen 30 since the big market selloff in November.

I’m buying an upside $60 call for .75 to protect me from a big rip higher.   I’m not going to buy any downside insurance because I my down BE is 29.50 and don’t see it breaking $30 any time soon.

I’ve got a lot of time to make this trade work and it’s got wide BEPs.  @29 and 50.  Stock is at $40 right now.   Historical IV on JEC is about 45 – it’s 75 right now.  I think IV will drift downward towards 45 again making the straddle more money.

The trade: Credit 10.63

Sell Open: Apr 40 call  5.95

Sell Open: Apr 40 put  5.45

Buy Open: Apr 60 Call .75

This entry was posted on Friday, January 30th, 2009 at 4:14 am and is filed under Trades. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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