Bearish on Priceline
Priceline (PCLN) shares are only pricing in a 7% move ahead of earnings this time around -- and I say "only" because the stock moved nearly twice this amount after each of the last two reports. Let's face it, though: As enticing as a straddle may sound, how many traders are going to lay out a $49 premium to get a single $675 March 1 straddle? If one were to buy the $675 straddle, then sell the March 1 $700 call/$650 put for nearly $22.50, that would mean risking $22.50 for a $2.50 potential profit on a $25 move. The move is likely, but risking 9x the potential reward seems illogical to me.Priceline (PCLN) -- Daily Source: StockCharts.com View Chart » View in New Window »
I'm actually bearish on the stock into earnings. That's probably a death wish, I know, but I am taking a conservative approach to my trade. I am going long a skip strike put butterfly via the March 1 $670-$650-$640 strikes. The price is jumping all over, but it looks to be around $5.25. I know we love to timestamp prices, but by the time this is up, this could be at $5 or $5.50. I would not be in it above $5.50. Then I want to sell a March 1 $625-$620 put spread for $0.75 or more against the skip strike put butterfly. As long as I am net into this trade for under $5, I am fine with it, since a drop below $620 would not result in a loss....141 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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