Monday, February 22, 2010

Actual position in STEC

Click here to see the orignal analysis

As I mentioned in the analysis last week. STEC will be reporting tomorrow. There is a lot of uncertainty that surrounds this name. Currently the options market is pricing in a 21% move in this name. I wanted to play this with a unbalanced straddle. And this is still true, my strikes have just changed since the stock has traded lower. See new risk profile and analysis from TOS platform below:


Buy 3 2:1 14 call/14 Put unbalanced straddle @ a limit price of $3.95 or better.


  1. So it looks like this position is going to be profitable tomorrow when the market opens. STEC reported earnings and the stock dropped from 13.50 down to as low as 8.50, it is currently trading about a $1 off this level. But based on the option pricing model I should be able to exit the trade for a profit of about $600. Now I am just wishing that this position was more bearish instead of bullish as the return would be about 3-4 times as much. But hey what can you do?

  2. I didn't pay attention to this post originally. I'm not sure I understand the ratio, did you buy 2 calls for every one put? or other way around?

  3. Yes I bought 2 calls for every put. It was basically an unbalanced straddle biased to the upside. But My intent was to set it up so that I could make money from either side. Obviously I would make more money on an explosive move to the upside, but nonetheless it was effective. After seeing the huge sell off from the forty's late last year when it announced earnings and the inventory issue it had with its largest customer I figured the move would be big. And the options market was thinking the same thing. My direction was just off, but that is why I chose the strategy that I did.