Naming my price in Priceline

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I have been planning an earnings trade in $PCLN and that day has come. I had worked up several different trade ideas but elected to execute the following plan:

  • Short March 1 weekly 670 Straddle as the 1st step
  • Long March monthly 670 Straddle (do this in stages)

This takes a different approach in that I am first selling weekly premium (elevated due to earnings catalyst) and then working through the rest of the day to buy the March monthly strikes as price moves in one direction and then back the other way. This takes advantage of the expected whipsaw/ebb & flow as we run into the earnings release.

When I initially reviewed the Option chain after the open today, the price difference was near $8 so I wanted to lessen that cost (I wanted to Name my Price). Buy taking this staged approach (which requires more work) I was able to ultimately reduce my cost outlay to a debit of $2.70 (sold the March monthly 670 Put first, then did the 670 Call as the last piece – when price went from Green to RED).

I am looking to further reduce this by selling some wayyyyy OTM premium in March (just considering this for now). A run into earnings makes this idea to sell Call premium way above, like at the 800 strike for example.

  • Terrence

    What’s your exit strategy on this trade? Exit all at once, exit the weeklies first then the monthlies, or leg out of the puts, then calls, etc?

    • 1nvestor

      I always plan by working through several scenarios. In this case, since I had a small credit – and short weekly options – I was in no rush to do anything. I elected to unwind the Straddle pieces earlier today once I saw it stall. I left the short Call way above to buy back later (which I have done).

      • Terrence

        I liked your idea so traded it. I unwinded the short put first, then the long monthly call shortly after that, and am still short the weekly call and long the monthly put. I think the market is probably going to pull back a little tomorrow with headlines of “dow all time high”, and PCLN has its earnings gap to fill so I’ll take a chance that it trades lower tomorrow. Prices are dropping into the close now at 698.70

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