Looking at today's option action in general in WFMI, as of this writing approx 16,000 contracts have exchanged hands on both calls and puts (total slightly over 32,000 contracts). There is no single block order of more than 500 contracts on any strike. Only 15% of all puts and 28% of calls traded so far were bought on the offer, mostly suggesting no clear direction after earnings. We still have a little less than 4 hours to go, so this whole picture could easily change.
Lastly, at-the-money $30 Feb straddle is going for $2.50, suggesting approx 9% move by this Friday. Note that the implied volatility in Feb is ridiculously elevated at 100, while March is at 49. That's a sharp IV skew. I will continue to monitor any unusual option activity into the close, but for now with lack of institutional interest and no clear direction, I like the following double diagonal calendar spread:
- Buy to open March $32 calls
- Buy to open March $28 puts
- Sell to open Feb $32 calls
- Sell to open Feb $28 puts
The trade can be done as of this writing for a net debit of $0.95 or less. The daily and P&L charts are attached. The trade remains profitable as long as the stock stays between $27 and $34, which is slightly outside the bands of at-the-money straddle. If you believe the stock can get out of this range, then you must also believe that the straddle is cheap despite IV of 100. In that case, you're better off just buying the straddle.
Unless I see change in sentiment in the option market by the market close, I like the odds of above double diagonal calendar.
Good luck!
