[Source: Livevol Pro]
With a Historical Volatility of 18.54 and an Implied Volatility Index Mean of 29.33 for an IV/HV ratio of 1.58 and a very bullish put-call ratio of .24, consider this combination.
In the event there is a correction in the next few weeks, there is a chance the Oct 20 put will be in-the-money and assigned. This could be part of a plan to establish a long ETF position. In the event there is no near-term pull back then the October will expire reducing the cost on the outstanding long call spread. However, if the correction continues back below 19, then consider unwinding.All in all I like the structure of the play. I'm a fan of using short puts on cheaper priced stocks particularly when one is seeking to accumulate shares of stock at a discount. The long call spread goes out a couple months giving traders ample time for the stock to move into the meat of the spread.
For related content, readers can check out:
IVolatility Trading Digest Blog
3 comments:
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