Trying to squeeze the last dime of risk from our butterfly spread will cost us, since the eight September 46 calls we were looking to short for 0.79 are now trading for around 0.37. In any event, I’ll recommend that you offer them short today for 0.45 — two for each pair you hold of Sep 42/Sep 50 calls. If we get our price we’ll have four Sep 42/46/50 call butterflies with $400 of profit potential each and a maximum loss of no more than $68 — still pretty good odds. Our maximum profit would come if the stock recovers into the mid-40s by early to mid-September. FYI, the nearest Hidden Pivot support where we might expect a strong turn this morning lies at 34.23 — 31 cents beneath yesterday’s bottom. If I revise the strategy given above, I’ll signal in the chat room intraday and also mail out an alert to all who are signed up to receive them. (You can do so by clicking on “Contact Us” on the home page.) _______ UPDATE (11:23a.m. EDT): The stock gapped up to 36.10 on the opening today, making the September 46 calls an easy short at 0.45, since they were worth more than 0.60 at the high. We now hold four September 42/46/50 call butterfly spreads for a 0.68 debit apiece. Do nothing further for now. The stock looks bound for a Hidden Pivot support at 31.74. (60m, A=40.50 on July 25 at 9 a.m. EDT, B=35.43 on July 25 at 10 a.m.) _______ FURTHER UPDATE (1:22 p.m. EDT): I’m retracting the short sale of September 46 SLW calls, since I’ve just heard from a subscriber who had a 0.45 limit order go unfilled. My guess is that the market makers read SLW’s head fake perfectly and were unwilling to buy any calls, even though they were hugely underpriced theoretically at our offering price of 0.45. They would have bought them for us if there had been bids for them to hit in other options, but apparently there were none (or at least, few). There being zero public bids for these calls, we could not make the sale. Under the circumstances, and with a bearish short-term outlook for the stock, my recommendation is to short the eight calls at-the-market, currently around 0.27. That will give us the butterfly for 1.04 — effective odds of 4-to-1 against SLW’s recovery into the mid-$40s by September. _______ FURTHER UPDATE (August 9): We shorted the calls, giving us $8 worth of verticality for $1.04. The maximum value of the ‘fly would be $4 if the stock is trading at or near $46 come September expiration.
