Look Both Ways – the series

Each week there are several opportunities in a stock to consider playing a BIG move in either direction. The problem being, you are not sure which direction – you are just sure that a big move is imminent.

One such scenario exists in $VRSN after announcing earnings – but noting an issue with the Commerce Department reviewing their contract with ICANN. This brings some significant uncertainty to the stock and the price reflects that at the moment:

So here is the situation. If the contract is not renewed, the stock will likely suffer more downside. However, if the contract is in fact renewed, I would expect a lot of this Gap above to get filled.

One way to play a Look Both Ways trade is own both a Put & a Call – this can be a straddle or a strangle.

Here is some Option chain info for November and December to review:

One trade idea:

  • Long the November 39 Call for 1.20
  • Short the December 41 Call for 1.20
  • Long the November 38 Put for 1.15
  • Short the December 36 Put for 1.15

This trade will require some margin and will need to be closed before November expiration on the 17th. Cost: Free (plus commissions). The contract expires on November 30th with ICANN so I would expect resolution before that time – so this play has that timing to consider.

Other trade ideas:

  1. Fork over $2.65 to own the November 39 straddle
  2. If you want to reduce cost, own the November 38/40 strangle for $2.00

Leave a Reply

Your email address will not be published.