A Volatility Trade on BBBY

I was nervous this morning as I thought about the naked puts I was holding into the Questcor (QCOR) conference call. If there was any mention of another large insurer going down the same path as Aetna (AET), QCOR could take another beating. The good news is the stock has bounced nicely with the conference call still more than an hour away. The September $22 puts can be bought for around $0.25 and they would make for a nice hedge. I added some ratio put spreads yesterday as well (which was disclosed via our Twitter feed) consisting of the 1 and 3 September 29 by 24 puts and 1 and 2 September 28 by 24 ratio put spread. I have these hedged as well, so now they are just skip-strike butterflies. These trades are profitable, so one might choose to close them; however, I am not going to do so.

As far as the combination trade from yesterday, I have made more adjustments beyond the purchase of the protective puts. I have also bought back the short September calls for a nickel and then moved the October $35 calls to October $30 calls in a selling 2 by buying 1 ratio. I could just outright close the trade for a loss around $0.50, which all things considered wouldn't be the worse thing in the world. These adjustments, along with the ratio put spread adjustments, don't leave me with a ton of risk here, so I'm content to roll through the conference call on this one....194 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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