NaughtyPines

OPENING: EXEL NOV 18TH 11 SHORT PUT

NASDAQ:EXEL   EXELIXIS INC
Here, I'm looking to sell a touch of premium in an underlying that has both high implied volatility rank (99.6%) and high background implied volatility (99.2%).

Metrics:

Probability of Profit: 70%
Max Profit: $85/contract
Buying Power Effect: Varies by Broker.*
Break Even: 10.15

Notes: I'll shoot to take this off at 50% max profit. However, I could also see working it as a precursor to a covered call. For example, if price breaks 11 by expiry, I would either take assignment of the stock at $11/share (and then proceed to sell calls against) or roll the 11 down and out for additional credit and then look to take assignment at a more favorable price ... .

* -- When I do naked short puts, I operate on the assumption that -- worst case scenario -- I will be assigned stock at the short put strike. Here, for example, I will need $1100 of buying power (100 shares x $11/share) per contract to accommodate the assignment of shares should that occur.
Comment: I got filled for an .86 ($86)/contract credit; price didn't move much during the day, so that same short put is going for .85 here.
Comment: Covering today for scratch. Although it could continue higher, just looking to reduce a little overall exposure to the market here.
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