Yowster 8,047 Report post Posted January 13, 2014 LULU down around 16% today after issuing lowered guidance. Next earnings are not until March, but this may be a good potential calendar spread candidate when we see where the stock price settles in over the next couple of days (and since LULU is one of those stocks that has multiple weekly series available there are a variety of option series to choose from). This is lining up as somewhat similar to the ULTA trade from December mentioned in this same forum (although in that thread I mentioned a 1x2 put spread for a credit, but you can't get a similar credit with LULU now so its just the calendar to consider). Share this post Link to post Share on other sites
tjlocke99 18 Report post Posted January 13, 2014 Why do you think a calendar would be good hear? You think vol will be higher in the short front month and also vol will hold-up better in the long back month? Thanks! Share this post Link to post Share on other sites
Yowster 8,047 Report post Posted January 13, 2014 Why do you think a calendar would be good hear? You think vol will be higher in the short front month and also vol will hold-up better in the long back month? Thanks! A lot of times after these types of announcements, stocks seem to settle into a tighter price range for a while. So, after giving LULU a day to so to settle into place, the odds of a calendar spread being successful seem pretty good. Share this post Link to post Share on other sites
tjlocke99 18 Report post Posted January 13, 2014 but why would a calendar be good? calendars are long vega and long theta. why would front month vol to drop faster than the long month? what weeklies/monthlies would you consider for this trade? thanks! Share this post Link to post Share on other sites
Yowster 8,047 Report post Posted January 13, 2014 but why would a calendar be good? calendars are long vega and long theta. why would front month vol to drop faster than the long month? what weeklies/monthlies would you consider for this trade? thanks! If the stock sticks around 50, I'd be looking at short the Jan24 weeklies and long the Feb monthlies. I'm not looking for any large changes in IV (although with the lower IV environment we are in, any increase in IV would help the trade). I would just be looking for the stock price to stay around 50 and the premium in the short weekly series dropping faster than the long monthlies (very similar to some of Kim's trades with RUT, SPY and post-earnings IBM). I'll definitely give it at least a day before entering this trade though. Share this post Link to post Share on other sites
Chuck451 155 Report post Posted January 14, 2014 I'm in at .93. Decided to go for it. Share this post Link to post Share on other sites
Yowster 8,047 Report post Posted January 14, 2014 I opened a trade on this as well. Hindsight is 20/20 as you could have opened this trade yesterday in the .70 to .75 range (but I still think it was safer to let the stock settle in a bit). Share this post Link to post Share on other sites
