After GOOGL’s insane pop higher on earnings it seemed to be having a little trouble staying above the 700 level. It was after all, up 150 dollars or so in the last month and change. We looked to fade the move back towards that 700 level that came with the Alphabet announcement, thinking a pullback towards 650 seemed rationale if not probable. This was the trade from August 11th:
Trade: GOOGL ($700) Buy Sept 700 / 650 / 600 Put fly for $12
-Buy to open 1 Sept 700 Put for 21
-Sell to open 2 Sept 650 Puts at 5.50 each or 11 total
-Buy to open 1 Sept 600 Put for 2
Rationale: This targets a pullback in the shares similar to what we saw after earnings. Implied vol is slightly higher today and the fly alleviates some of the premium risk associated with an out of the money trade here.
We’re up a little money on the trade despite the suddenly crashy nature of the market. This is not a great environment for an in the money fly as the spike in implied volatility means you don’t realize most of the gains that would be coming from getting the direction right. We don’t want this to become worthless if stocks continue lower and GOOGL drops below 600 so we’ll take it off for a slight profit here:
Update: Sold to close GOOGL (639) Sept 700/650/600 put fly at 16.00 for a $4.00 profit
IMPORTANT NOTE: Spreads are extremely wide on a volatile day like today and this price does not reflect bid and offer of the individual legs. The best strategy on a mult legged trade on a day like today is to start mid market and slowly walk the price down until filled. DO NOT PUT IN MARKET ORDERS when the market is so thin.