JDSU Ichimoku Stock Option Bearish Setup: 4-26-10

JSDU has moved up drastically for the last couple of months.    We basically have moved back into the consolidation zone from last year before it broke down and then started to move up slowly.   Today, we are at the 52 week high and earnings is coming out.   To buy calls, it is expensive since this instrument has been moving up continiously for a long time.   However, to go bearish, it is cheap to do so especially if we choose out of the money put options.
Here is the daily chart for the stock
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Here is the risk graph for the option.   The implied volatility is around the average for the last 2 years.  Therefore, we don’t have to worry about volatility too much.   For this trade, we are hoping to make money solely off the delta.   With earnings, we may get some from vega but we aren’t going to count on it.     Remember, we are going against the trend since this is a COUNTER TREND play.  Therefore, keep your risk and option contract size very low.  T  

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About the Author Manesh Patel