At 10:29 A.M., March 20th, 2008, ChartBender's Real-time IV Top 20 report identified a straddle that was cheap on a relative basis. The trade was the JNPR April 22.5 straddle. At that time, the trade's fair value was $2.80. It closed that day at $3.40. By 3/25, it was up to $4.40 on the close.
The Top 20 Report directs one's attention to the ideas that warrant further research, thereby saving time and helping the trader seize opportunities.
What did the trader find out about JNPR upon looking closer? To begin, the stock's daily chart on 3/20 showed the stock to be at the bottom of its trading range. What's more, a volatility squeeze taking hold - that just means that the stock was trading in an increasingly narrow range, which typically begets larger volatility. That, in combination with the unusually low implied volatility on the April straddle, had the aroma of opportunity. In fact, the stock jumped up sharply almost 7% two days later generating substantial gains in the straddle. See the full 3/20 report here: Full ReportSign up and get the report emailed to you the moment the ideas are generated.
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