Yo traders –
Let’s map out a convexity-based trade scenario using LOAR stock and the April 17, 2025 $75 Call option — currently trading at $1.00, with the stock at $65.97 and only 18 days to expiry.
Step-by-Step Breakdown:
🧠 1. Basic Structure
You’re buying the LOAR Apr17 $75 call at $1.00.
This is a deep OTM bet (~13.7% above current price).
You’re betting on a short-term move to $75+, meaning volatility spike or news catalyst.
️ 2. Convexity Setup
Convexity means:
Small risk, asymmetric reward
If LOAR stays flat or dips → you lose $1 per contract
If LOAR rips to $80+ → this option could return 5x to 10x+
LOAR Price at Expiry Option Intrinsic Value Profit/Loss
$66 (flat) $0 -$1.00
$70 $0 -$1.00
$75 (strike) $0 -$1.00
$77 $2.00 +$1.00
$80 $5.00 +$4.00 (5x)
$85 $10.00 +$9.00 (9x)
🧾 3. Chart + Sentiment Setup
Looking at the TradingView chart:
Price Action:
LOAR is basing around $66 after a steep downtrend — potential reversal pattern
Volume is light, but some buy pressure is visible
MACD:
Appears to be flattening and potentially crossing bullish
RSI:
~40s: Oversold-to-neutral zone. Could support upward bounce.
Earnings coming up (E icon):
Strong potential for a catalyst move
This setup enhances convexity, because earnings can produce gap moves that DOTM options profit from disproportionately.
4. Convexity Scenario Thesis (Narrative)
“LOAR has pulled back hard and is showing signs of base-building. Earnings are in 2–3 weeks. If guidance surprises to the upside — or macro tailwinds hit the sector — a short squeeze or re-rating toward $75–80 could occur. I’m risking $1 per contract for a shot at $5–10. If it doesn’t move, I accept the full loss.”
This is a classic event-driven convexity play.
️ 5. Risks & Considerations
Time decay is brutal: With only 18 days left, theta decay accelerates daily
IV Crush post-earnings could hurt even if the stock moves
You need a fast, strong move, ideally before or at earnings
Position sizing is critical: This is a “lottery ticket” — don’t over-allocate
6. Ideal for Your Strategy If:
*You’re making many small bets like this across tickers/catalysts
*You’re not trying to be “right” often, but “big” occasionally
*You have capital discipline and uncorrelated base assets
🧮 Position Size:
Option price = $1.00 per contract
You buy 100 contracts of the $75 call
Total risk = $100
Each $1.00 move above $75 = $100 profit per $1, since 100 contracts × 100 shares/contract = 10,000 shares exposure
Upside Payoff Table
LOAR Price at Expiry Intrinsic Value Total Payoff Net P&L Return on $100
$65–$74.99 $0.00 $0 -$100 -100%
$76 $1.00 $1 × 10,000 = $10,000 +$9,900 +9,900%
$77 $2.00 $20,000 +$19,900 +19,900%
$80 $5.00 $50,000 +$49,900 +49,900%
$85 $10.00 $100,000 +$99,900 +99,900%
$90 $15.00 $150,000 +$149,900 +149,900%
$100 $25.00 $250,000 +$249,900 +249,900%
🧠 Interpretation
Max Loss: $100 (fixed, regardless of LOAR’s move down or sideways)
Breakeven at Expiry: LOAR must hit $76.00
10x return if LOAR trades just $1 above strike
Massive asymmetry — you risk $100 for a shot at $10k–250k if LOAR rips on earnings or news.
Real-World Considerations:
You might exit early if the option spikes in value before expiry (e.g., stock runs to $72 with 5 days left).
Liquidity may limit large size fills.
Volatility matters: IV spike pre-earnings or a big gap post-earnings increases your chance of profit.
Convex Payoff Table for LOAR Apr17 $75 Call (100 Contracts, $100 Risk)
LOAR Price at Expiry % Move from $65.97 Intrinsic Value Total Payoff Net P&L Return on $100
$65–$74.99 0% to +13.6% $0.00 $0 -$100 -100%
$76 +15.2% $1.00 $10,000 +$9,900 +9,900%
$77 +17.0% $2.00 $20,000 +$19,900 +19,900%
$80 +21.3% $5.00 $50,000 +$49,900 +49,900%
$85 +28.9% $10.00 $100,000 +$99,900 +99,900%
$90 +36.4% $15.00 $150,000 +$149,900 +149,900%
$100 +51.6% $25.00 $250,000 +$249,900 +249,900%
🧠 Takeaway:
Even a 15% move turns your $100 into $10,000 — this is why convex trades are so powerful.
But the trade-off is probability: the odds of a 15–50%+ move in 18 days are low, which is why risk is capped and position sizing matters.