The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (

Top Gun Options

) -- Our

Top Gun Options Strategic Mindset: Playing IV drop from earnings announcement

Target:

Amazon

(AMZN) - Get Report

trading at $193.88

Commit Criteria:

Amazon has its Implied Volatility (IV) in the near term weekly options at an excessively high 128%. The March expiration options have an IV of roughly 48%.

Right after the earnings Announcement tonight the IV of AMZN will drop significantly. By selling a position in the near term weeklies and protecting ourselves in the Advanced Model Portfolio with the March expiration options, we should be able to capture the crash in IV while keeping moderately protected from price movement.

We are looking for possible price movement but for it to stay between the $170 to $220 price range until the exit of this trade. We will likely hold this trade until the weekly short positions expire, giving us the maximum profit.

Tactical employment:

Buying to Open 5 AMZN Mar 2012 195 Calls

Selling to Open 5 AMZN Feb 2012 Weekly 205 Calls

Selling to Open 5 AMZN Feb 2012 Weekly 180 Puts

Buying to Open 5 AMZN Mar 2012 190 Puts

As a Custom Trade

For a net Debit of $14.68 ($1468 per position for a total of $7,340)

Maximum Gain: $4,000 estimate

Maximum Loss: $4,000 estimate

Mid-Course Guidance:

We will be watching for a good exit point as early as tomorrow with the possibility of letting the short positions expire on Friday. If the price moves outside our safe range of $170 to $220 we will be exiting this trade to protect against further losses.

Profitability Target:

We will allow the short position to expire worthless and capture rough more than $3,000 in profits

Exit tactic:

Allow short positions to expire worthless and immediately close the long protective positions.

Firing Line:

This is an Advanced Tactic. To see this trade managed for maximum profit or min loss

click here now and get airborne. Happy Hunting and make sure you hedge!

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.