ZNGA Back Ratio

Zynga has been having some trouble since earnings.  After a large gap down it continues to move down.

2012-08-04-ZNGA-TOS_CHARTS

 

How to take advantage of this?  One possible way to attack the topic is with a Back Ratio.  The risk is different in this case since the $0 level becomes the lower strikes of a butterfly spread.  This was trading for a credit a few days ago which makes this trade a no lose strategy.  Over the weekend it’s still a $0 + commissions risk if it stays where it is and if it drops even more it could be worth more.  This should be treated like a lottery ticket Butterfly trade.  It’s somewhat unlikely the price drop into the profitable range, but if it does this could be a winner with a max profit of around $100 per spread.

2012-08-04-ZNGA-Analyze

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