CGC, critique this options play

[Daal]

At $32.5 I think the stock is a good bounce candidate/value play, Constalation paid quite a bit more than this for their stake and the stock is down a lot very quickly. I also think realized vol will come down as it tends to happen after the big catalysts pass (This time being CA legalization, which happened 2 weeks ago). I'm considering putting today this trade

Long Nov 09 32.5 calls
Short Nov 09 37 calls (I dont think the stock will go back to highs any time soon)
Short Nov 09 32.5 puts
Long Nov 09 30 puts (just in case)

All the in the same quantity. If spreads are not crazy, I can get this done for a small debit. Is this a good way to express my bias or is there a better way?

 

[Daal]

I got in at a -0.5 debit which was more than I expected. Spreads were quite though at the open. By my calculations I'm delta positive and pretty much neutral on the other greeks (slight short theta). Any way I could have done this play better? I guess I'm not short vega even though that was my bias

 

[beerntrading]

Why not long the $30 and short the 37....puts or calls, doesn't matter.

You have a synthetic-long (the long call / short put $32.50). That has the exposure of shares (plus options transaction costs, minus margin costs).
Shares plus short call = short put @ $37

So, you position is, in effect, an expensive and illiquid, put credit spread. The call debit is the same exposure too.

 

[Daal]

Why not long the $30 and short the 37....puts or calls, doesn't matter.

You have a synthetic-long (the long call / short put $32.50). That has the exposure of shares (plus options transaction costs, minus margin costs).
Shares plus short call = short put @ $37

So, you position is, in effect, an expensive and illiquid, put credit spread. The call debit is the same exposure too.

Cool, I guess I should have done that. How would you have played if you wanted to express a similar bias?

 

[beerntrading]

Cool, I guess I should have done that. How would you have played if you wanted to express a similar bias?

I think you're asking the wrong question. You should be asking what can you learn from this about options trading (because there's some good lessons in here).

1. Any time you are long a call and short a put on the same strike (or long put, short call), you're taking on share exposure--either long, or short--and even different but close strikes have similar exposure. This is useful to know if you ever end up legged-in to a position, or if you need to exit while one side of the chain is much more liquid than the other. (This is also half of a box expressed the other way).

2. Any time you have share exposure and 1:1 ratio with an option position, that exposure can be expressed with a single leg--typically reversing the call / put at the strike, remaining long (or short the contract), and forgoing the share position. i.e. 100 sh XYZ + short $50c = short $50p. Or long 100sh XYZ, short 2 $50c = $50 short straddle.

As far as what I would do, I actually have had a short vol bias on CGC recently--so something straight directional isn't a position I like. I would think modest limited gains in a volatile environment would certainly be a short theta play--I'd look at long calendars and short straddles. You can make these directional plays by using the $37 or $35 strikes.

One thing I would say...if you want to go the fly or condor route, I'd look at taking on the full straddle exposure during the day and looking for good fills on the wings. CGC in particular has a lot of retail activity on it, and you'd have no problem getting a favorable fill across the spread on deep OTM long wings.