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  • A High-Risk, High-Reward Play On RIM Pre-Earnings [View article]
    That’s true, but you can also make 50-100% or more with options in matter of days. You are not comparing apples to apples. Options offer tremendous leverage and flexibility and in many case less risk than stocks. The question is how you are using them.

    A little bit off-topic, probably subjest for a separate article..
    Dec 4 12:59 AM | 1 Like Like |Link to Comment
  • A High-Risk, High-Reward Play On RIM Pre-Earnings [View article]
    Gary,

    I found out that 30% loss in options in a reasonable loss, compared to the potential gains, but of course this is a personal choice. If this is too big for you, you can set your own mental stop loss and exit when it is hit. If the IV increase will not offset the negative theta and the stock doesn’t move, the loss in any case will be very gradual, maybe 2-3% per day worst case. The value of the spread cannot just lose 20-30% in one day like a single option.
    Dec 3 07:19 PM | Likes Like |Link to Comment
  • A High-Risk, High-Reward Play On RIM Pre-Earnings [View article]
    Thank you Brian.
    Dec 3 03:44 PM | Likes Like |Link to Comment
  • A High-Risk, High-Reward Play On RIM Pre-Earnings [View article]
    Thank you Ex Ray. The beauty of those trades is that I don’t need to guess the direction and do any kind of fundamental or technical analysis. I need the IV to rise (which always happens) and I need the stock to move (which happens most of the time).

    14 days ATR of RIMM is about 6-7%, so 10-12% move in 2-3 days is very possible.
    Dec 3 01:40 PM | Likes Like |Link to Comment
  • A High-Risk, High-Reward Play On RIM Pre-Earnings [View article]
    Gary, you are basing your calculations on holding till expiration. This is not what I’m doing here. I will ride the rising IV all way to earnings and sell just before earnings to those who want to take the chance and hold through earnings. Maximum that I ever lost in those kinds of trades was 30-35%, and this is rare. You can always get out at pre-defined loss level. There is no danger of gap here since I’m playing both sides – in fact, gap is good for this trade.
    Dec 3 01:36 PM | Likes Like |Link to Comment
  • A High-Risk, High-Reward Play On RIM Pre-Earnings [View article]
    I think there is still a lot of uncertainty here. Remember NFLX stock? It was down a lot before earnings and still lost another 40% after earnings.
    Dec 3 01:32 PM | Likes Like |Link to Comment
  • A High-Risk, High-Reward Play On RIM Pre-Earnings [View article]
    Typically I would also buy about a week before earnings. However, on Friday I noticed that IV was down around 8-10%. Usually IV starts rising about 14-17 days before earnings for RIMM. This time, current IV is actually lowers than a week ago. I think this is an anomaly. I expect the IV to start rising very soon. If the stock also moves, the trade can be a nice winner. Of course I might be too early, but I like the odds here.
    Dec 3 01:31 PM | Likes Like |Link to Comment
  • Research In Motion: A Good Stock For Writing Put Options [View article]
    There are many ways to play RIMM. I suggested one of them in my latest article - http://seekingalpha.co...
    Dec 3 12:55 AM | Likes Like |Link to Comment
  • How To Buy Bank Of America Stock At $4.50 And Apple For $350 [View article]
    I think it is worth mentioning that naked puts require fairly large margin (I think around 20% of the stock price). So in case of AAPL for example the margin would be around 390*20%=$7,800. If you keep the $1,500 credit, the return on margin would be ~19%.

    An alternative trade with much less margin requirement would be to sell 355/365 put credit spread. The credit would be only ~$3, but the margin is $7, so if AAPL stays above $365, the return on margin is ~43%, more than double the naked put.
    Dec 3 12:46 AM | Likes Like |Link to Comment
  • A High-Risk, High-Reward Play On RIM Pre-Earnings [View article]
    Earnings are 50/50. Sometimes the results are not good but because the expectations are already so low, the stock might recover.

    I don’t know what will happen on Dec. 15, but the whole point of this trade is that I don’t care. One thing is certain: IV of the options will skyrocket as we are getting closer to the date, and this is all I care. I make money from rising volatility and/or the stock move BEFORE the earnings, and I don’t care which direction the stock goes.
    Dec 3 12:18 AM | Likes Like |Link to Comment
  • How I Trade AutoZone Before Earnings [View article]
    No, the criteria is the same for strangles and condors. In this specific case, I just liked the risk/reward of the trade. The options were cheap - in fact, the IV was the same as a month or a week ago. I don`t expect any extreme IV changes, but at least few points increase might be possible. And if the stock moves just 10 points, you can get 25-30% gain. The stock moved $6.5 on average lately, so $10 move is very reasonable.
    Dec 2 01:57 PM | 1 Like Like |Link to Comment
  • Seeing How Put Option Skew Works Through SPY and XLF [View article]
    Excellent article.

    Can we get any practical conclusions based on this data?
    Nov 30 07:36 PM | Likes Like |Link to Comment
  • Option Plays To Consider For Stocks Reporting Earnings The Week Of November 28 [View article]
    Well, timing is always tricky with those trades. With the stock up 28%, it could easily retreat and all the gains would be gone.

    But yea, now it would be a double..
    Nov 30 02:23 PM | Likes Like |Link to Comment
  • Option Plays To Consider For Stocks Reporting Earnings The Week Of November 28 [View article]
    Michael,

    I don`t want to speak for Kevin, but yes, the key here is IV. I believe that over time, the options tend to overprice the potential move. I don`t think that Kevin ignores it, he just hopes to overcome it with three things:

    1. Lowering the cost base by legging in.
    2. Having few occasional homeruns to compensate for the losers.
    3. Holding beyond the earnings day if the trade is not profitable right away.

    So far looking at the trades he shared with us, he definitely gets the desired results. The main disagreement between us: I think that legging in and out and holding beyond the earnings day doesn`t properly represent the `pure` strategy, but as long as it works, who cares..
    Nov 30 01:36 PM | Likes Like |Link to Comment
  • Option Plays To Consider For Stocks Reporting Earnings The Week Of November 28 [View article]
    Yes, definitely an excellent trade. So you paid 0.49 which was below the mid? Or did you leg in?
    Nov 30 01:01 PM | Likes Like |Link to Comment
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