OPENING: TWTR NOV 11TH 14/18/18/22 IRON FLY (EARNINGS PLAY)
Playing TWTR earnings for volatility contraction here ... .
The metrics:
Probability of Profit: 47%
Max Profit: $217/contract
Max Loss/Buying Power Effect: $183/contract
Break Evens: 15.83/20.17
Notes: As with a short straddle, I'll look to manage this at 25% max profit. I'm putting this on a touch early so that I don't space it out at the last moment. My ordinary go-to strategy for earnings/vol contraction plays are either a short strangle or an iron condor, but I just couldn't get the credit I wanted out of those setups with this underlying, so went with an iron fly instead.
The metrics:
Probability of Profit: 47%
Max Profit: $217/contract
Max Loss/Buying Power Effect: $183/contract
Break Evens: 15.83/20.17
Notes: As with a short straddle, I'll look to manage this at 25% max profit. I'm putting this on a touch early so that I don't space it out at the last moment. My ordinary go-to strategy for earnings/vol contraction plays are either a short strangle or an iron condor, but I just couldn't get the credit I wanted out of those setups with this underlying, so went with an iron fly instead.
Trade closed manually:
Closing here for a 1.71/contract credit; $41 net profit/contract after fees/commissions. I would note that I had a heck of a time closing the entire fly as a unit, so I opted to close the short straddle portion of the setup first and then the long options separately.