And here was the monthly setup I identified at the time:
The way I played this was long two spreads. I bought one Jan 2017 $105/$110 call spread and I bought one Jan 2017 $87.50/$82.50 put spread for a net debit of $1.57.
I closed out the call spread today for $2.95 (after commissions), while the $87.50/$82.50 put spread expired worthless. Not bad for taking a flyer. Here's what I liked about this trade:
- I was able to profit despite being direction neutral (I was both long and short, I just didn't know which way was correct at the time, nor did I need to)
- I was able to allow myself lots of time between trade identification and time to expiry
- I let the market do whatever it wanted to do
Here's what I did not like about this trade:
- I did not have an open order in the market to close out the put spread. But, this is not a big deal, as Disney never actually got down below $87.50 where the p/s would have been profitable. I think that going forward, it would make sense to at least put a GTC order in the market on both legs in case there's a spike up or down in the market.
Here's how Disney turned out:
In my play account, I'm always looking for interesting setups and ideas, and I stumbled across Nike, see below, the setup looks eerily similar to Disney pre break out:
So, once again, I am simultaneously long the June 2017 $57.50/$62.50 call spread and the June 2017 $47.50/$42.50 put spread for a net debit of $1.54 in my IB account.
The difference now is that I have a GTC order in the market to sell the p/s for $2.95 and I may do the same with the call spread so whatever direction this breaks, I may end up making something on either a move down or a move up (or both). I may end up adjusting the GTC orders to $2.50 to at least be halfway between the two strikes on either side.
The distance inside the pattern (call it what you will), is around $20, so conservatively, I expect a move either up or down of at least 1/2 of this distance, depending on how exuberant the Fast Money traders are on the day/week of the break out. The one thing I can count on is that the idiots on CNBC will work everyone else watching them into a frenzy chasing the breakout on their say.
My ideal scenario is a sharp move down to test $44, my GTC p/s gets bought by someone in a panic, and then a sharp retracement back up to $64, and my c/s gets bought by someone else in a panic, whipshawing everyone who was positioned incorrectly by listening to Fast Money in the first place along the way.
I know this all sounds a bit evil, but it really is a zero sum game of chess. I really don't care which way it breaks, I just care that it breaks and hits my GTC orders on one side or the other, and the more volatile, the better.
The risk to me is that it doesn't move below the short strike in either case and I lose my premium.