[Opening Straddle on Cardinal Health (CAH)/Simultaneously Buying to Open the Jun 70 Calls (CAHFN) and the Jun 70 Puts (CAHRN)/Day Order/Limit $8.10]
Dear Member,
Cardinal Health (CAH) is dealing with a resistance around 68.25. The implied volatility is currently in only the 5th percentile which means the options are relatively cheap. I am placing an order to open a Jun 70 straddle, simultaneously buying the Jun 70 calls (CAHFN) and the Jun 70 puts (CAHRN) for a debit of $8.10. If filled, and no adjustments are made, that is my maximum risk and even that would only apply if the stock finished exactly at 70 on expiration in June. On the other hand, there is a theoretically large profit potential if the stock moves rapidly in either direction and/or if the implied volatility increases significantly.
In straddle buying, many times there are small losses, but these can well be offset by the gain on just one big mover.
DISCLOSURE: At the time of publication, I have no position in the referenced options or the underlying stock.
Sincerely,
Bill Kraft for
CutLoss, Inc.
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