Seems like you could get a similar result by doing an out of the money straddle, and capital requirements would be lower. Your proposed straddle has you first receiving $45,200 for your option sales, then having to buy 825 LU for $95,000 (meaning you're out of pocket by ca. $50,000), then selling 800 LU a month later for $64,000, thus pocketing roughly $14,000 with high probability. (Though if LU rises above $115, the put doesn't get assigned, and your return starts to drop; if LU rises above $136, you lose money.)
If you wrote 10 ASND Jun 70 puts for 6, and 8 LU Jul 120 calls for 10, you'd collect $14,000 up front. As long as LU stayed between 85 and 120, you'd keep the entire premium. You don't lose unless LU drops below about 67 or rises above 137. To me, this looks like a pretty similar risk/return to your proposal, but you don't need to cough up an extra $50K for a month.
Thoughts? |
