Initially few OP readers mentioned about these two companies that have very very high volatility due to pending FDA announcement about their major drugs. Today I was surfing elite trader and I found similar discussion on the forum so I decided why not we take this discussion right here at OP. In some ways, this IV inflation is similar to earnings announcements that I have extensively covered  in several posts in the past using two option trading strategies i.e. back spread and diagonal back spread. One key difference for AGIX/ BMRN vs. earnings is that till the time news is not out IV will be continued to rise and then right after the news is out, IV will crash. 

Keep pouring in your ideas and we will cover the discussion via open dialogue in the comments section. I shall  soon share risk/reward analysis and some ideas on how to benefit from this opportunity.  Stay tuned.Profitable trading, OptionPundit

Seems like google will be pinned around $470. Google backspread was profitable with $1.20 on $$8.80 margin. SHLD Iron fly is also fine and so is OIH. Conngratulations to those who played in one way or the other and benefited from the market action today.

Cheers and profitable trading,

OptionPundit

Here are couple of ideas for trading the pinning action today. Pls keep in mind though that these are only a few of the several strategies to play pinning and when market opens the prices may or maynot be same vis-a-vis my analysis.

While trading this I need to be very careful. For instance in first example, my breakeven points are 456.35 and 463.66. As soon as Google starts to move in either direction away from breakevens, I need to either close the trade or manage it in such way it doesn’t incur losses. Today is the last day of Feb options and hence the options will lose premium very fast. Most of the premium will lose its value only in the last few hours after lunch. Let’s begin the show:

1. The Google great : Look for Bear call spread of 460/470 and Bull put spread of 460/450. This creates an Iron fly that gives a credit of $335 vs risk $635. Breakeven points are 456.35 and 463.66The maximum profit is achieved only if Google closes at 460 at the market close. Here is the chart —>  
2. Google backspread : I am looking at short 460 put and long 2 450 puts. This trade gives $120 credit over $880 risk. Breakven point is $458.6. As long as google stays above it, I will not lose money. If it stays above 460, I will be able to keep all my premium. Here is the chart–>
3. SHLD Iron Fly: I am looking at bear call spread 185/190 and bull put spread 185/180. The break even points for this trade are 183.22 ans 186.75. I can create a backspread for SHLD as well for -1 @ 85/+2 @180 puts. Here is the chart for Iron fly—>  
4. OIH Fly: Other play that I am looking at is OIH iroon fly or backspread. Specifically I am looking at $135/$140 bear call and $135/$130 bull put spread. This trade is going to yeild 165 over 335 risk but only if OIH expires at 135. Here is the chart–> 

There are many more. One just needs to analyze and review which ones have potential to be pinned. One thing to keep in mind, this will require continuous monitoring of the trade so that appropriate action can be taken. When market opens I shall review what prices I should open the trades at.

Cheers and enjoy the profitable expiration, OptionPundit

Disclaimer : As with other posts, this is not an advisory. These are my personal trades that I open for viewing. Please read the legal notices and disclaimer here for details.