Earnings trade management post earnings, an update on OTEX

Posted by: Admin: "The Vol_Trader"  //  Category: Earnings Trades, Trade Management

So, last I reported OTEX was up in the PM after reporting good earnings.  As I predicted my short SEP calls lost their extrinsic value but unfortunately gained lots of intrinsic value as the underlying moved up. 

My plan was take a loss if OTEX moved above it’s opening high at 9:35am.  Well, not all things go as planned.  I was busy with my regular job seeing patients and by the time I checked the price near the close OTEX had made new highs and was heading down into the close.  I held…

The next day, Friday I was in surgery at the open.  After my surgery I check the price and figured I’d hold and see if OTEX would go down to fill the gap.  I was in surgery all day and when I checked at the end of the day, the gap was not filled and OTEX was pretty much even all day.

Today, Monday, I decided to use my upper end of the opening gap on earnings as my stop out.  OTEX was flat all day and I’m still holding waiting for either a stop above the earnings gap, $43.14 or a move down to take some profits.  At this point there’s little theta effect so holding isn’t terrible.  I’m very long Vega so a move down will benefit me more than the current P&L chart below shows.  (click any picture to enlarge)

I’ll keep you posted on this trade.  As you probably can tell from reading my previous posts, I’m always more comfortable in the current market being bearish.  I am still (still still still – it seems) bearish on this economy.  If this trade were positive delta I would have taken it off already.


UPDATE OTEX trade management after earnings release

Posted by: Admin: "The Vol_Trader"  //  Category: Earnings Trades, Trade Management

If you have not already, please read my guest post at Option Pit (Click here) prior to reading this post.

So, OTEX reported, “profit up on higher revenue and cost cuts”.  Premarket the shares are up from their close of $37.25 to $41.  See chart below: (click any picture to enlarge)


At $41 our trade is suffering the max loss I predicted yesterday to the upside as of this writing premarket.  (See P&L plot below) When the market opens I’ll look to close my short puts first and then see if there’s any decrease in underlying price as I think today should be a down day with the terrible jobs numbers…


UPDATE: 09:31  Ok, so the market now is open and OTEX is up around $43.80.  I bought back my short $35 Sep puts for $0.10 for a nice profit.  Now I will watch to see the price action of OTEX.  I predict it will hit it’s highs at the open and spend the rest of the day retracing it’s gains. 

UPDATE: 09:51  As predicted OTEX hit it’s high If it makes a new high on the opening 5 minute bar and has come down some.  I’ll continue to monitor now.  The 5 minute chart and current P&L plot after the short put was closed are below.



I will continue this post later today, stay tuned.

MCK – out of the rest – an earnings trade gone well

Posted by: Admin: "The Vol_Trader"  //  Category: Earnings Trades, Trade Management

Click here to see my MCK earnings trade setup and trade management.

This morning at the open I closed the remaining spreads for a debit of $0.14 for each 3:2 spread.  On 7/29/10 I entered this trade for a credit of $2.70. 

This trade went exactly as planned.  My prediction were spot on for IV and direction.  (click picture to enlarge)


DIS – Managing this earnings trade that has become short Theta

Posted by: Admin: "The Vol_Trader"  //  Category: Earnings Trades, Trade Management

So, yesterday I didn’t get to exit my DIS trade like I had hoped to.  My regular readers know that when a trade moves in the desired direction I often take my time to get out in small increments, however, with this trade I’m anxious to get out.  Most of my trades are theta positive and with time working on my side I don’t rush to exit.  This trade is theta negative and time is working against me.   I am long back month options and short front month options but still theta negative.  This is because there’s so little extrinsic value left in my short Aug options due to OPX being only 8 days away and because of the Vol Crush that occurred after earnings.

This trade is very short delta and the futures are showing some weakness pre-market and so is DIS (on very light volume).  I’ll monitor and start exiting today. (click picture to enlarge)


ASML – an interesting observation:

Posted by: Admin: "The Vol_Trader"  //  Category: Trade Management

Today, ASML is up 1.37% as I write.

Even though the underlying is up a lot, my long Jul $32.50 and $35 calls are actually down. This is because we are very close to expiration and theta and vega are working against them.   Remember, as the market goes up longs sell their put protection causing IV to drop.  As the puts lose so do the calls due to put-call parity.

My short Jul puts are up, obviously because then are long delta and short vega, both working in their favor.

Interestingly, my long Oct $35 puts are up and my $30 puts are about even.  So the underlying is up and so are the long puts, what gives?  VEGA!  Someone is buying Oct puts as the underlying moves up and they think they’re getting a discount on this stock that is in a downtrend.

With 16 days remaining in the Jul expiry most longs would not opt to buy Jul put premium as protection and go further out.