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January 14, 2013

$LULU Jan/Feb Double Calendar spread


Jan 14, 2013
  • Strategy: Jan/Feb 65/75 Double Calendar spread
  • Underlying: LULU (Lululemon Athletica Inc - NDAQ)
  • Trade: Sell to Open Jan'13 65 Put; Buy to Open Feb'13 65 Put; Sell To Open Jan'13 75 Call; Buy to Open Feb'13 75 Call;
  • Trade price: $2.05 debit
  • Margin: $2.05 per spread
  • Profit target: 10%-20% of margin (.20¢-40¢)
Risk Profile:

Trade Duration: Jan'13 options expire on Friday (1/18/13). Best case scenario for this trade is LULU trades either at 65 or 75 by Jan expiration. We are selling front month options and buying back month options to take advantage of Theta or time decay. Our long options will decay at a slower pace and any increase in volatility should help this trade reach our profit target sooner. We will constantly monitor this trade to determine if/when adjustments need to be made.