Stock / Symbol: Linked In / LNKD
Price at trade post: $94.25
Option Strategy: [private_monthly]put spread[/private_monthly]
Reasoning: With a PEG ratio of 2.16, [private_monthly]LNKD is clearly overvalued and likely due for a pullback if we get further pullbacks in the market. With a Delta of -.36 on the 90 puts and -.26 on the 85 puts, we're going to need to see a pretty violent move down to capture profits in this trade. As such, this is a pretty low probability trade (44%) but the risk to reward is pretty good if we're right. One thing helping the trade is that the implied volatility is relatively low, and with a current Vega of .12, we can see an in increase in volatility help to offset the time decay (-.09 Theta) of our long puts.[/private_monthly]
Trade Details:
[private_monthly]
BTO 2 LNKD Ju112 90 puts
STO -2 LNKD Ju112 85 puts
for a max net debit of $1.80 per contract. The mid is currently at $1.70 (current bid $1.50 / ask $1.90) (GTC, limit order). If not filled by EOD tomorrow, cancel the order.
Requirements:
Cost/Proceeds $360
Option Requirement $0
Total Requirements $360
Estimated Commission $12.95
[/private_monthly]
Max Risk: $360
Max Reward: $640 or 77% at/under $85 by Jul 20
Profit Range: 0$ to $88.20 by Jul 20
Suggested Downside Stop: down $110 or 30.5% on trade
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Hi,
You were discussing the new trade rational on LNKD CALLS, but the trade detail is PUT. Do I misunderstood your message? Pls advise.
Thank you
Thomas, Thanks for the note on the mistake in my post. The trade is a put spread so I meant to say “puts”.
Mike