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.

How to setup an options trade for an earnings release -OTEX

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

Please see my guest blog at Mark Sebastian’s site, The Option Pit Blog.  Click the picture below to get there:

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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)

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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)

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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)

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Below is the Thinkorswim analyze tab at the current price:

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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