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.


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)


DIS – an update after earnings announcement

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

So, last night at the close DIS reported earnings.  Initially AH the stock was up but as of right now, DIS is trading down 2.75% at $34.32

As you can see from my previous post (Click here) I was looking for a big move up or down to profit from this trade. 

We didn’t get the move I was looking for, however, I’m about breaking even and actually up a few bucks (enough to cover commissions at least).  Why did this trade work even if the underlying did not make the desired move?  (Rhetorical question).  My prediction of IV was correct.  August lost mostly all of its extrinsic value and Sep did not. 

You can see in the LiveVol Pro skew tab below how the Aug IV (red line) dropped back down to the same level as the back months. (click any picture to enlarge)


Below is the Thinkorswim analyze tab at the current price:


You can see the current P&L (white line) is almost all above the breakeven line due to the IV drop. 

At this point I’m thinking of exiting all or half at breakeven.  With less than an hour to trade today, I’m going to watch for a late day sell off.  I’ll likely exit if we get it or not.

I’ll keep you posted.  Thanks for reading! Lawrence

An update on MCK earnings trade – trade management, exit strategy.

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

As I last posted (click here) on MCK the day after reporting when I closed three 3:2 spreads for $1.00 debit after initially getting a credit of $2.37 when putting them on.

I said that I was in no rush to take off the remaining spreads as they had become positive theta when the underlying moved down.

I’ve been patiently holding them with orders open to take off small positions at a time.  With time passing and MCK down a bit more, so far today two more 3:2 spreads have executed and closed for debits of $0.78 and $0.62. 

I still have four spreads open with orders to get out of them at $0.45 and $0.36.  I may move those orders up and get out of this trade by the end of the day today.  So far profit on this trade is $1768 including both open and closed positions.

The remaining contracts look like the Thinkorswim analyze tab below. As you can see there’s little profit potential left so I’ll look to be out by day’s end today. (click any picture to enlarge)