LDK - Long Strangle Play

[aaaapolon]

Discussed the concept of this strategy a few months ago with aiki; basically when you are playing this plan...you are expecting to stock to make a big move soon in the future but you are not sure which way it will go. Great example is hyped earnings, great earnings will skyrocket the pps or the other way around, or drug trials for example. So you buy an out-of-the-money put and call and when the stock moves one way, the other becomes worthless and you'll make money if the stock's price moves enough to cover your premium.

http://i5.tinypic.com/7xspu0g.png

[ablktlnu73]

LDK at $58.81 per share.
Buy the DEC 70.00 Call for $2.75
Buy the DEC 40.00 Put for $0.50 (or 45.00)
Max. Loss = Net Debit = $2.75 + $0.50 = $3.25
Upper Break Even = Call Strike + Net Debit = $70.00 + $3.25 = $73.25
Lower Break Even = Put Strike - Net Debit = $40.00 - $3.25 = $36.75

(Probably could also play the January's, depends on personal opinion.)

So as outlined above once, once LDK reports and also releases it's audit report, I'm expecting a big move either way, no bets right now. If LDK runs above $72.75, I'll make a profit. Likewise, if LDK drops to below $39.50, I'll be in the green. This strategy is an extremely great way to make money as long as the stock pps doesn't remain between the two strike prices. You could also play with a more narrower delta between the calls and puts.

[abuaboyisonib]

Enjoy, hope you guys will learn and benefit from this.

[acekuwihaz]

Here's a graphic analysis of the trade. I used $2.40 for the DEC70 call and $0.80 for the DEC45 put. The stock price was $59.45. I assume 10 contracts for each option for a total cost of $3,200 before fees.

http://onlinetradersforum.com/attachments/ldklongstraddlevol-analysis-jpg.2263/