Ichimoku Trade Setup: Unusual Put Volume CHD, Church & Dwight Inc.

We executed the Unusual Put Volume scan for Options this Monday morning.    We came across a stock CHD, Church & Dwight Inc. Com.  The Ichimoku charts show the stock is on a major Ichimoku support.

Below is a snapshot from www.ichimokutrade.com for the Scan from the scanner.  It shows the Put volume on Friday was 1027.  The previous day was 15 and the 20 day average for Put volume is 184.

  Ticker Description Price Vol. Dir. strategy A20PVol P1Vol PVol AvgIV CurrentIV
    CHD Church & Dwight 66.18 460,853
Dn
-5
184
15
1,027
16
17

 

Below is the Weekly Ichimoku Chart.    Price is bullish and pulling back to the weekly Kijun Sen.   Earning is coming up on August 1.    We are looking for price to get to the weekly ts at 68.36 with a 1.00 stop loss.   When we get to 68.36, we will go to preserve mode and tighten our stop.    This will give us close to a 3:1 reward/risk ratio.

7282014_chdoptionchart

Since earnings is coming up, we are going to look for cheap out of the money call options with the Volatility around 16 since the Average IV is 16.   Here are the option chain:

2014-07-28_095828optionchain

We are looking at the Calls on the left side of the screen with Volatility around 16.    Jan 70 calls are 0.64 by 1.55.   This is a huge difference between the bid and ask.   We are going to try to get it at 0.70.   Our stop is 1.00 so we are going to risk 1 delta which is 0.28.    To preserve mode where we are going to protect our profits, it will be 3 delta i.e. 0.28X3= 0.84 of reward.    Since we are below the Average IV, hopefully, we will get some reward from Volatility too.

Since the bid/ask is huge, we may not get filled but we can’t risk more than 0.70 due to the delta.

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