NaughtyPines

YUM 10/6 EARNINGS PLAY

NYSE:YUM   YUM! BRANDS INC
YUM announces earnings on 10/6 after market close, so if you're going to play this via an options setup, look at getting a fill for whatever you put on prior to the 10/6 New York close.

Ordinarily, I trade these using a short strangle or iron condor, with the short call/put legs at or around the 1 standard deviation line for the chosen expiry, which will either be the Friday immediately after the earnings announcement or the Friday thereafter if the earnings announcement is too late in the week to manage the trade post-announcement if necessary.

SHORT STRANGLE:

A short strangle is an undefined risk strategy that consists of selling a put and a call with the assumption that price will remain between the strikes of the put and call for the duration of the contract.

Oct             16th Expiry 74.5 Short Put/89 Short Call Short Strangle
74% Probability of Profit
Maximum Profit: $121/contract
Buying Power Effect: Undefined
Break-Evens: 73.29/90.21

IRON CONDOR:

An iron condor is a defined risk strategy that consists of a long put, a short put, a short call, and long call with the assumption that price will remain between the strikes of the short put and short call for the duration of the contract.

Oct             16th Expiry 72 Long Put/74.5 Short Put/89 Short Call/91.5 Long Call Iron Condor
70% Probability of Profit
Maximum Profit: $57/contract
Buying Power Effect: $193/contract
Break-Evens: 73.93/89.57

Look to take both of these trades off at 50% max profit ... . Should price breach one side or the other of your setup, look to roll that side out to a later option expiry for credit and, if possible, for an improvement of your strike prices.
OMG, epic fail. I will look to close out the short call side tomorrow; it is now virtually worthless. I will roll the short put side out 45 DTE or more (whatever it takes to improve the strikes and get a credit that will at least pay for the roll) and then proceed to sell short call verts against the position until I can it at least back to scratch ... .
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When a test of a side occurs, making the trade eventually profitable or mitigating your loss is all about rolling for credit and then selling the oppositional side against. This sometimes takes several cycles of 45 DTE expirations ... .
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Looking like there is going to be a breach of the short put side of this set up (trading down 13.00 in AH trading). Although I have a few more days for the trade to "work out," my guess is I'll be letting the call side expire worthless, will be rolling the put side down and out, and then matching the rolled out put side with an oppositional call side. Sometimes earnings plays work out great, sometimes they don't ... .
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Ultimately filled an Oct 16th 72/75/90/93 Iron Condor for a .47 credit ... .
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