Anatomy of a Trade – $CYBR Chase

by CC March 31, 2015 3:59 pm • Education

Last week we looked at CYBR stock and offered a stock alternative:

Technically this stock looks decent near term as long as it can hold this recent $50 level. We don’t like buying the stock here for that reason but the for those that are inclined the options market provides a safer alternative. With no events in April and implied volatility probably a little residually elevated an in the money call fly in lieu of stock or simply as a bullish defined risk bet makes sense. The April 50/60/70 call fly is currently about 2.80 with the potential to make up to 7.20 if the stock is at $60 on April expiration. Intrinsically that’s an entry in the stock at 52.80 vs the current 53.75 price. It’s also only risking 2.80 vs risk to zero if the stock fails to hold these levels. There is a sacrifice that the profits trail off above $60 but that’s low probability.

The stock did indeed act well technically. Today, with the stock at 55.50 this fly is worth about 3.50 and 3.75 and is obviously worth 5.50 intrinsically. It also still has a lot to run upside before the position becomes short deltas ($60). The longer the stock is at this level the better it does. (especially with a 3 day weekend coming up). Currently this trade gains about 7 or 8 cents a day in decay (the short 60 line decays faster than the long 50 and 70 lines)

Earlier today we looked at a similar alternative in ADBE.

I just wanted to emphasize how these trades work and why they are in fact good alternatives. Yeah it’s annoying that they are multi-legged, but when one is able to buy a stock they’ve been thinking about but with defined risk and have similar payouts above to realistic levels, it makes much more sense than simply buying stock. We’ll continue to highlight set-ups like this in an effort to show more and more stock alternatives