Options expert Gary Kwapik recommends an iron condor leading into Yelp Inc YELP earnings tonight. With a $6 expected move in the stock, Kwapik recommends putting the short call and short put just outside of that range. Then, the trader will buy a call and put farther away from price to limit the risk of the trade in case the price blows through those levels.
Yelp is currently trading at $56.40, down 0.5% on the day.
Kwapik says that with duration on the options at one day, the implied volatility will collapse tomorrow morning with the binary earnings event over.
Max loss on the trade is the width of the strikes less the premium the trader collects. The trader is looking for Yelp to move less than $6 and stay within the two short strikes.
One final note, Kwapik recommends that traders enter the position at the end of the day, when any daily movements can be taken into account.
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