A week ago we looked to fade the bounce off the 600 level in CMG into its earnings event and target that level for a re-test. We wanted minimize the premium out-layed as this is a fairly crazy stock when it get’s going so we did a wide fly. Here was the original trade:
Trade: CMG ($654) Buy July 24th weekly 650/600/550 Put Fly for $10
-Buy to Open 1 July 24th 650 Put for 21.50
-Sell to Open 2 July 24th weekly 600 Put at 6.25 or 13 total
-Buy to Open 1 July 24th weekly 550 put for 1.50
Since that entry the stock has grinded higher and broke out a little today, up 1.7%. So the problem into earnings is it really looks like we have the wrong strikes here with our break-even more than $30 to the downside. The good thing implied vol is so much higher the initial trade is only a slight loser here despite the big move higher in the stock. We’re going to take that small loss and not be left with a lotto ticket into the event, which was never the intention:
Action – Sold to close the CMG ($672) July 24th weekly 650/600/550 Put Fly at 9 (for a $1 loss)
– Sold to close 1 July 24th 650 Put at 16.60
– Buy to close 2 July 24th weekly 600 puts at 4 (8 total)
– Sold to close 1 July 24th weekly 550 put at .40