YHOO has been in Stage 3 since October, so it's been due for a downside breakout. Well we have confirmation of a downside breakout and, seeing as it's March and most stocks are prepping for a drop into March, the timing makes sense too.
Their most recent earnings release was January 24th and they "met" earnings. Their next earnings release is April 19th so there should be no earnings surprises popping up short-term.
I want something in the money that also expires next month. I chose the Apr 21st $15 Puts with a bid/ask of $0.82/$0.83. I do not want my position size to exceed $1,000 so I'll put in a limit order of $0.83 for 12 contracts, for a total position size of $996
My ideal target profit is 35%. My commission on the trade is $7.50 plus $1.25 per contract, so my total commission after buying and selling is $45. This makes my total cost basis $996 + $45 = $1,041. Divide $1,041 by the inverse of 0.35 which is 0.65. This gives us a target of $1,601.54 which means I must sell when the bid price equals $1.34 per share per contract. I will go ahead and enter a GTC sell order at 1.34.
EDIT: To verify this I will enter both the buy and sell order using Td Ameritrade's "Paper Money" feature on their ThinkOrSwim platform. For those of you that don't know, it simulates actual trading by letting you put in buy and sell orders, and then it fills them as though they were real.
