Reason I like this Trade: I looked at the amount of movement that AKAM has had over the last 4 quarters and it has been very wide. Here is a performance of how much the stock has moved the next day after earnings.
10/27/11 $23.78 $27.45 $+3.67 (15.4%)
07/28/11 $29.48 $23.84 $-5.64 (-19.1%)
04/28/11 $40.98 $34.94 $-6.04 (-14.7%)
02/10/11 $47.99 $40.75 $-7.24 (-15.1%)
Average Magnitude of Post Earnings Return 16.1%
When I see movements like this, I want to be a buyer of premium instead of a seller. I am betting that AKAM will make a HUGE movement on earnings and it has been seen that the high flyers have been moving more than the big BLUE chip stocks. This is why I put this trade on even though I am risking more than other trades.
Please feel free to email me with any questions at andrew@keeneonthemarket.com.
UPDATE 2.9.2012 I sold 2/3 of my stock last night at $38.80 and the rest at $38.90 today. The calls will be worth $4.90 w stock trading at those levels. I am left w Feb 34 puts and I will be looking to sell at any profit possible.
UPDATE 2.10.2012 I am glad this trade worked out, because Visa and Linkedin did work out so well. This straddle that I bought at $3.97 I sold out at $4.90 and I have free puts. Moving on to the next trade.
UPDATE 2.14.2012 These February 34 Puts are virtually worthless, so I have locked in my profits and its on to the next trade.
Read more about total by keeneonthemarket.com