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)

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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…

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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.

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I will continue this post later today, stay tuned.

V – update – trade management, a favorable roll

Posted by: Admin: "The Vol_Trader"  //  Category: Volatility Trades

As you know from my previous post and update on the V trade (Click here to see), we’ve taken off 3 of the 10 contracts for a profit. 

Since then, the underlying has moved up and away from our profit zone.  (Trade was entered with V at $74.20 on 5/21/2010 and moved as high as $77.49 on 6/10/2010.

Yesterday I rolled the remaining 7 short Jun $65 puts up and out to the Jul $70 puts for a credit of $1.67 (Bought back the Jun $65 puts for $0.07 and sold the Jul $70 puts for $1.60). This moves my upside breakeven price up to around $72.95 at current IV’s.  V is currently trading above that at $74.64 as I write.

Below is the current Thinkorswim analyze tab after the roll. (Click to enlarge)

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As when I initiated the trade, I’ll keep $80ish as my mental stop.

This is a good example of a favorable roll at expiration week.  I was able to buy back my short puts for $0.07 and stay in this trade a bit longer.  Since I’m long the Sep expiry, theoretically, I can roll to short August puts as well in the future.  Had I lost faith in my bearish opinion on V, I would have taken the loss and closed the trade.  I’m still convinced that there is downside potential here.  By performing this roll, I stay in the trade.  By moving the short strike up by $5, I’m able to increase my chance of profiting as well compared to rolling to the same $65 Jul strike.