Tony Zhang Gives An Update On His Southwest Airlines Trade

On July 9, Tony Zhang recommended a bullish options trade in Southwest Airlines Co LUV. Since then the stock has been trading flat so he suggested some changes on the Friday's edition of CNBC's "Options Action".

Back in July, he bought the September $52.50 call for $3 and sold the July $56 call for 60 cents. The July call has now expired and he is holding the September $52.50 call, with an entry price of $2.40. Zhang thinks that both technical and fundamental thesis are still standing so he wants to buy more time by selling the September $50/$55 strangle.

He wants to sell the September $50 put for $2 and the September $55 call for 80 cents. With the premium collected, he would bring the trade to a credit of 40 cents, but he would have to buy Southwest Airlines at $50 if it drops to $50 or lower at the September expiration. If the stock stays between $50 and $52.50, Zhang would make 40 cents. If it trades higher, to $55, he can make $2.90.