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New Position - Long CELG...

If the support level on the S&P holds, then this will be a good opportunity to buy on a dip... if it breaks down then the positive convexity of the trade should kick in and limit losses... plus other shorts should continue to run.

Implied volatility has ticked up a bit, as would be expected, but it's still within a decent range on this name... the projected vol for the life of the option is 23% vs an implied vol of 32.5% for the at-the-money call.

Here's the trade:

Short 55 shares CELG at $125.78
Long 9 September $135 calls at $1.18

Upside breakeven:      $136.58
Downside breakeven: $106.18
Expected value range: $250 - $700
Max Loss to Trade Cost: -19.6%
Trade Convexity:
  • 10%:       6.7
  • 12.5%:  15.9
  • 15%:     19.1

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