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Free Trade of the Week: Keurig Green Mountain (GMCR) – Earnings Trade – After the markets close 8/6/14

Keurig Green Mountain (GMCR) – Earnings Trade – After the markets close 8/6/14

Keurig Green Mountain, Inc. (GMCR) is scheduled to report earnings after the markets close on Wednesday, August 6, 2014.

This is a stock that has consistently made large price moves quarter after quarter when reporting earnings, as this shows:

May 8, 2014 97.89 108.22 96.25 104.19 8,678,400 103.98
May 7, 2014 95.31 95.56 90.35 92.21 3,352,900 92.03

Now that the share price is even higher, we should see a large move once again. There is an 8% short float on this stock, which can be beneficial with volatile stocks such as GMCR, as short sellers will cover on any move up or short it more on any downturn. GMCR is almost always a must-play earnings trade, as not too many stocks move like it does in terms of percentage. For this reason, I will be placing a Strangle strategy. The trade is not inexpensive, by any means, as the IV increases dramatically leading up to earnings and the historical volatility also plays a role in the cost of the trade. Still, this is a solid 9/10. This trade has the potential to be a major homerun.

Here is how the trade is placed:

Entered Trade

Buy 8 GMCR Sep14 130 Call
Buy 8 GMCR Sep14 110 Put

Requirements

Cost/Proceeds $5,920.00
Option Requirement $0.00
Total Requirements $5,920.00
Estimated Commission $24.00

Greeks / NBBO

Symbol Bid Ask IV Delta Gamma Vega Theta
GMCR Sep14
130 Call 3.65 3.75 45.16 261.29 15.39 119.73 -62.22
GMCR Sep14
110 Put 3.65 3.80 47.87 -221.98 13.50 111.27 -59.72
Net 39.31 28.89 231.00 -121.94

NBBO 7.30 7.55. Try to pay 7.45 or less for this trade, and a maximum of 7.75.

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