Is it Sunset, or Sunrise in Sunoco?

Let’s face it, there are often moments in a stock’s movement where the trade opportunities are quite fuzzy – there is little edge to be seen. The situation in $SUN is one such opportunity as price is drifting into the Gap Fill area on the Daily chart after a huge gap up move on April 30, 2012. Too late to short? Scared that the deal gets done after all? Bidding war, etc?

Here is a glance at the chart:

One way to remove the need to pick a direction is to simply Look Both Ways. Here is one way you can do just that:

  • Long the August 48 Call
  • Short the June 48 Call
  • Long the August 44 Put
  • Short the June 44 Put

The above trade can be put on for $1.25 as of the close Friday. If no deal is announced before June expiration, and the short options expire, you then can make tactical moves with July option(s) as appropriate. You will be long August options so you can enjoy a LOT of time to let the trade play out.

Look Both Ways.

3 thoughts on “Is it Sunset, or Sunrise in Sunoco?

  1. Why are the long and short options in the above trade the same for the call 44 and the put 48.

    JS

  2. The strategy where you use a Diagonal Call/Put Calendar provides the trader with the opportunity to benefit from the natural ebb & flow of a stock. On the up move, you look for a topping pattern to sell the long call (in the case of the Call calendar) and then you look for the pullback to address the short call.
    This trade gives you TIME and a lot of FLEXIBILITY.

  3. Pingback: July Option expiration | 1nvestor

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