YUM: POST-EARNINGS STRATEGY
My little YUM saga continues and is likely to do so for the next several options cycles, but this is a good lesson on how to manage earnings plays (or any other play for that matter) where a side of your set-up is breached either to mitigate your loss on the setup or turn it into an eventual winner. Of course, this requires a degree of patience, since it sometimes takes several rolls to position the strikes in such a manner that you can exit the trade with a smaller loss, for scratch, or even as a winner.
To recap: On 10/6, I filled a YUM Oct 16th 72/75/90/93 Iron Condor for a .47 credit. Post-earnings, price of the underlying plummeted, breaching the short put side of my set-up. On 10/8, I covered the short call side of the setup for an .08 debit, leaving me with the short put credit spread side (72/75) underwater ... .
With the short put side expiring Friday the 16th, my plan is to roll the short put side out to the November 27th expiry. Currently, however, I cannot get a credit for doing that. In fact, if I roll out the put strikes I have now (72/75) "as is," I will have to pay a debit for the privilege (which I ordinarily don't like to do). Currentty, I will have to pay a .63 debit to roll the 72/75 put credit spread to the November 27th expiry.
That being so, I will look to finance the roll with a short call spread with a November 27th expiry that will at least net the cost of rolling the put side: a 73/76 short call spread with the Nov 27th expiry currently goes for a .87 credit, which will satisfactorily cover the cost of rolling the short put side and result in a setup which is very nearly an iron condored short straddle.
Naturally, the setup is less than ideal, but buys me additional time to mitigate the loss of the original setup and to adjust the strike prices going forward with additional rolls on either the call side, put side, or both, ideally collecting credit along the way ... .
To recap: On 10/6, I filled a YUM Oct 16th 72/75/90/93 Iron Condor for a .47 credit. Post-earnings, price of the underlying plummeted, breaching the short put side of my set-up. On 10/8, I covered the short call side of the setup for an .08 debit, leaving me with the short put credit spread side (72/75) underwater ... .
With the short put side expiring Friday the 16th, my plan is to roll the short put side out to the November 27th expiry. Currently, however, I cannot get a credit for doing that. In fact, if I roll out the put strikes I have now (72/75) "as is," I will have to pay a debit for the privilege (which I ordinarily don't like to do). Currentty, I will have to pay a .63 debit to roll the 72/75 put credit spread to the November 27th expiry.
That being so, I will look to finance the roll with a short call spread with a November 27th expiry that will at least net the cost of rolling the put side: a 73/76 short call spread with the Nov 27th expiry currently goes for a .87 credit, which will satisfactorily cover the cost of rolling the short put side and result in a setup which is very nearly an iron condored short straddle.
Naturally, the setup is less than ideal, but buys me additional time to mitigate the loss of the original setup and to adjust the strike prices going forward with additional rolls on either the call side, put side, or both, ideally collecting credit along the way ... .
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