MomentumOptionsTrading.com Weekly Wrap (VRA) Trade Update for 9/12/2013
1:25pm (EST)
We have an update on our Vera Bradley (VRA, $19.08, down $0.37) strangle option trade from earlier this week. Shares have been extremely volatile over the past 24 hours after trading up to $21.24 before Wednesday’s close and reaching a low of $17.27 this morning.
The options have gone through triple-digit percentage swings so let’s go see where we are at, overall, now that the dust is settling.
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Weekly Wrap Premium Section
1:25pm (EST)
Current Trades
Vera Bradley (VRA, $19.08, down $0.37) Strangle Option Trade
October 17.50 puts (VRA131019P00017500, $0.50, down $0.20)
Original Entry Price: $0.80 (9/10/13)
Exit Target: $1.60
Return: -38%
Stop Target: None
October 20 calls (VRA131019C00020000, $0.70, down $0.65)
Original Entry Price: $0.80 (9/10/13)
Exit Target: $1.60
Return: -13%
Stop Target: None
Action: We made a rookie mistake by not setting limit orders ahead of yesterday’s close and it cost us a double. We printed yesterday’s call option quote to show you our oversight and since we trade our own trades, we can’t take credit for getting out near the high because we didn’t send out a Trade Alert or set limit prices to close the trade at $2 or better. This was our plan before we got into the trade. Other cheesy option newsletters would have taken credit for a 200% winner but we don’t roll that way and we admit our mistakes.
Overall, the trade is down 25% as we went with the October calls and puts.
Had we went with September options, our losses would have been greater as the premiums were seriously deflated today. Although we are disappointed, we still believe the trade can work. We will likely close the call options by tomorrow’s close and leave the put options open going into October with a tight stop.
Again, our bad on the mistake and we should be able to squeeze a small profit out of this trade to offset some of the drama. We learned an important lesson today and we will make sure our next strangle option trade is better prepared to play the possible volatility like we have seen with this stock and to lock-in triple-digit gains we we have them in our account.
Again, look for another update on this trade by Friday’s close.