On 11/25/19, we entered an earnings strangle in BBY, 79 call and the 67 put for the Nov 29th weekly expiration. It had a nice IV rank for the play at 65 and we pulled in $127 credit for the trade. Giving us a break even of $80.27 to the upside.
Well the earnings came out positive and BBY made a huge upside move. It blew past our break even and at the time of writing this traded at $82.73. So an adjustment needed to be made. Due to the volatility crush, and only 25 days until Dec 20th monthly cycle, there was not a lot of premium left in this expiration. So we took it the Jan 17th, but we have choice to make, what January strikes are we going to use? If we use the 1 standard deviation strangle, because we have to buy the November position back, this is going to leave us with best case scenario of a $174 loss.
We can move the strikes closer to collect more premium, but our odds of BBY staying within our range diminish. Never the less the 2 option we are left with are the 87.50 call and 77.50 put strangle. Giving us a best case scenario of a $54 profit and break evens at $77 and $88.
Or using the $82.50 straddle giving a best case scenario of $425 max profit. And moving break even to $78 and $8.
We chose to just roll the dice and go with the straddle. We will keep you posted as the trade progresses.