In fact, on 5th May (today), one could Short VRX 15th July 2016 Put 32.5 at around 5 USD.
VRX closing price on 5th May turned out to be about 34.5.
So, if the Long Term Investor using Short the above Put Option turned out to be wrong in his directional call i.e. if VRX fell considerably after his Long trade, he would at least secure a price that is about 7 USD lower than buying the stock outright. [ 7 USD = difference between current market price and strike price which is 2 USD and the premium sold which is 5 USD].
This 7 USD lower price is actually about 20% of current market price of VRX.
That is, our Long Term Investor would end up buying VRX at 20% lower than current market price - and VRX is already at Pendum Low !
Not a bad deal after all. This advantageous trade set up was made possible by inflated premium on the Put Option just before earnings.
Some of the Superior Profit Investors might have indeed Shorted the Put based on the Community post. However, that is not the only way you could profit from that post.
Point 2 on chart above> Next day (today) Valeant opened almost at same level as yesterday's Close. Then moved down little bit - penetrating Early Range Low for 1 Candle (5 Minute is the default interval in CUE Fine Tune Template). And very next Candle provided confluence of multiple signals:
A) Trader was looking for only Long trade based on the post in Traders Community.
B) At this point, Bearish Stretch was Released (Oversold condition went away).
C) Stretch Released was accompanied with Heavy Activity in the bar - indicating the volume was attempting to hold price.
D) Price closed back above Early Range Low.
E) Stop Loss Point (just below day's low) was very small.
F) Potential profit - assuming it was going to hit at least Early Range High or Last Day's Close - was much bigger than the Stop Loss distance - giving an attractive Reward Risk Ratio.
That looked like a good Low Risk entry point for a bullish position on Valeant for Day Trade using CUE Fine Tune Template.
It could be traded as plain Stock Long Day Trade.
This trader, instead, played it as a Short Put Day Trade - taking a cue from the posting in Traders Community.
He used the Option VRX 6th May Put 33.5 to establish a Short Put position (which is a Bullish position on the stock).
Immediately after entering, half position profit taking order was placed at 50%. That was hit during the day (in Superior Profit Way, we always like to Take Money Off The Table when we can). Rest was held till end of day.
Valeant meandered throughout the day within Early Range. At end of day the position had 70% profit and entire remaining position was closed at that time - as this was planned to be a Day Trade.
Below is the brokerage snapshot where the trade was actually placed.
Note that during the day max profit percentage hit was actually 78%. Overall the trader closed the trade at 60% (average of 50% and 70%) profit. A sizeable profit indeed.
The trade was concocted from the Long Term Investment idea posted in Superior Profit Traders Community and applying Real Time Fine Tune chart analysis and identifying a CUE Stretch Release Bullish Day Trade.
Once a CUE trader gets accustomed to this color coded and easy to use system, she/he tends to identify and execute such trades routinely and effortlessly.
For more information on how to trade using CUE System, you may refer to the extensive educational material at Superior Profit Education Center.
Does your system and technique allow you to cook up such trade opportunities in an equally easy, unambiguous way and, may I say, fun way?
Citizen of Main Street.