Short Put Option Trade - AOL Inc (AOL)

20th January, 2015

Short put ideas for the 19th of Jan had AOL's $42 put options bid for 0.75 with 19 days until expiration (Feb 6th expiry);

However, AOL has an earnings announcement out on the 4th Feb, which could see the stock reverse its' trend if the result is poor. Average implied volatility for AOL is at 50.3% and rising vs 34.3% a month ago while historical volatility is at 39% vs 32.9% a month back.

The IV is decent, but I think it a bit risk on AOL to be short the put before a figure so I'm looking at the $42 strike on the next closest expiration - January the 30th;

Implied vol on the $42 put is high at 74% - but check out the bid ask spread! 0.05 bid, offered at 1.45. Huge. Worth a shot though, so I've entered a limit sell for the put at 0.70;

See how it goes. If I'm filled at 0.70, here's the breakeven level on the chart;

Keep you posted!