I know nothing about Spreads, how did this YUM Trade make money?

R

RabidTrader

YUM was down to $67.60 and I am curious how this person made money using Spreads. I bought the book one of you recommend with the Study Guide and Video plus the 1300 pages of large information.

This trade was off the Option Radar Scanner as being one of the biggest trades on YUM. YUM is now at $69.30 and probably will open between $69.5 x $71 like it usually does after bad news. How much cash does someone make on this?



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thats a calendar spread so they shorted VOL the later spread makes money when there is a vol crush following earnings but its also skewed. Also they did puts not calls so they assumed it was a tank
 
EliteTraderNYC said:
thats a calendar spread so they shorted VOL the later spread makes money when there is a vol crush following earnings but its also skewed. Also they did puts not calls so they assumed it was a tank
More...




No .... Both trades are directional Debit Spreads. The long legs were roughly ATM, short legs OTM - payoff will be huge.

EDIT: The short legs did cap the profit though - without them the payoff would have been much higher (assuming YUM trades at $70.00).


:)
 
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