Be The House Into WYNN Earnings

We sent another earnings trade to members before today’s closing bell.  Today’s earnings trade was in WYNN.  Here’s what members received via email at around 3:00pm EST.

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WYNN is the only name on the after market earnings report list that we have interest in trading.  It’s the only liquid stock with a liquid options market that offers a nice pre-earnings premium in implied volatility (IV).

The IV we are referring to is the Feb1 weekly options IV of 95%.  These options expire tomorrow, so in playing these options you are forced to make it a pure earnings play.  The expected earnings move in WYNN is 5.75, giving it an expected move range of 113 - 124.50.

We are going into this with a bullish bias.  After looking at a few strategies we have decided on something that is not purely bullish in direction, but will reward us more for a bullish report than a bearish or neutral one.

Here’s what we did…

Sold WYNN Feb1 12 110/125 Strangle @ 1.25 credit (sell one 110 put, sell one 125 call per spread)
Bought WYNN Feb1 12 120/125/130 Call Butterfly @ 0.95 debit (buy one 120 call, sell two 125 calls, buy one 130 call per spread)
This results in a lower b/e of 109.70 and upper b/e of 127.65.  Both b/e’s are outside of the expected move range, giving WYNN cushion to move more than expected.  There is a large range of $30/spread profit in the event of move between 110 - 120. The call butterfly allows max profitof $530/spread at the upper end of the expected move range (125), which compliments our bullish bias on WYNN.

Here’s the risk plot profile of this spread to provide you with a visual of this spread…