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  • Trading Google Before Earnings [View article]
    I will have to check, but looks like you took the strikes with lower deltas. I could also go further OTM and the trade would be cheaper.
    Jan 4, 2012. 03:27 PM | Likes Like |Link to Comment
  • My Investment Strategy For 2012 [View article]
    Thanks mcm and welcome to my articles.

    I'm using Interactive Brokers Canada, they require only one side.
    Jan 4, 2012. 03:25 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    Zornra,

    I tried to hold through earnings couple of times based on the same logic, but it didn't work well. Unless you expect a serious move, I would sell.

    I'm actually up about 9% on MON 67.5/72.5 and down 5-7% on MOS 52.5. I'm waiting till the last half hour.
    Jan 4, 2012. 03:18 PM | Likes Like |Link to Comment
  • How I Trade AutoZone Before Earnings [View article]
    Hello denariig,

    There is a very good explanation here - http://bit.ly/ArvUx8

    You are basically buying a strangle (320/340 in our case) and selling further OTM strangle (310/350) to reduce the cost. The maximum gain is realized if the stock is above the short call strike (350) or below the short put strike (310) and is equal to $10. Since we don't wait till expiration but sell before earnings, realistically you can expect the whole trade to be worth about $5-6 if the stock moves 2-4%.
    Jan 4, 2012. 03:09 PM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    Which strikes?
    Jan 4, 2012. 01:10 PM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    Hi Victor,

    I'm always looking at percentage move, not points move. If GOOG moves around 5%, the trade should gain 25-30%, depending on the time remaining, assuming IV remains unchanged. Check how much currently worth the condor with strikes 30 points lower and you will see what I'm talking about.
    Jan 4, 2012. 10:17 AM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    Yes all options will increase but the spread will become wider since more expensive options will gain more. With the overall trade having +12 vega, it should compensate the negative theta.

    What do you mean by "graph the options volatility with price"?
    Jan 4, 2012. 10:12 AM | Likes Like |Link to Comment
  • My Investment Strategy For 2012 [View article]
    IV increase. Read my original thesis here - http://seekingalpha.co...

    Just trades that I shared here on SA in the last couple of weeks:
    AZO trade: +20%
    FDX: +27%
    RIMM: +5%

    My past trades include some 50-100% winners, with average return of ~10% for those trades.

    Commissions eat about 1-1.5% of the gains.
    Jan 4, 2012. 09:46 AM | Likes Like |Link to Comment
  • My Investment Strategy For 2012 [View article]
    Hey everyone! If you like the article, please recommend it by clicking the button on the top left hand-side of the article, left of the "in" button, so it will get on the readers recommend list and get exposure. You can also share it on Facebook and twitter.

    Thanks!
    Jan 4, 2012. 09:25 AM | Likes Like |Link to Comment
  • My Investment Strategy For 2012 [View article]
    I stopped holding through earnings. Too much gambling and risk. You might get an occasional homerun, but since I believe that on average, options are overpriced before earnings, long term I prefer to be a seller and not a buyer before earnings.

    The risk is definitely less with March options. Have you observed any IV chances on options so relatively distant related to earnings or for you it's more gamma play and not vega play (although gamma is also much smaller for those options)?
    Jan 4, 2012. 09:17 AM | Likes Like |Link to Comment
  • How To Profit From Sideways Markets - An Options Strategy (Part 1) [View article]
    Excellent points kiki.

    You are absolutely correct that rolling increases the capital, so it is critical to have some reserve capital for adjustments. And the ROI should be calculated based on the new increased capital.

    The action depends mainly on time to expiration. If there is little time left, then exiting is usually the best option (for me personally). Option 2 is not an option, at least not for me. Condors can be brutal and must be handled with respect, although for those closer to the money trades you can allow for some more room. Option 3 is definitely possible, depending on circumstances.

    Thanks for your comment. The trade was very successful from money making point of view, but useless from educational point of view. It actually might lead to over confidence.
    Jan 3, 2012. 10:42 PM | Likes Like |Link to Comment
  • My Investment Strategy For 2012 [View article]
    Hey Jim,

    Thanks for your comment. Don't you think it's a bit early, 20 days before earnings? I usually set those trades about 5-7 days ebfore earnings. In addition, NFLX has weeklies which will be impacted much more than the regular Feb. options.
    Jan 3, 2012. 08:50 PM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    I just wanted quickly to comment on another article on GOOG earnings which recommends the same strategy with two significant differences:

    1. He recommends closer strikes (615/625/665/675 when GOOG was at $645, I assume that strikes will be adjusted 20 points higher for the current GOOG price.
    2. He recommends holding through earnings. The reason:
    "If you are content with a mediocre profit trading Google's earnings and selling your position before the numbers are released (with a 50/50 shot at it even working), then you can take that route. I will not trade Google's earnings for a small gain."

    The cost for his trade is 6.50 which translates to maximum gain of 53%. That requires ~5% post-earnings move. However, even if the stock makes larger move (unless the move is really monster), you won't be able to sell for the full $10, probably closer to 9.50-9.60 which reduces the gain 46-50%, compared to profit potential of 25-30% if sold before earnings.

    But the main problem is the following: the probability of 5%+ gain is fairly high. But what if the stock moves only 2-3%? It happened a year ago and can happen again. It's not likely, but definitely possible. In this case, since this is a last day, the trade can easily lose 70-90%.

    It's your decision what you prefer:
    1. Trade with high probability to make 45-50% and low probability to lose 70-90% (with no chance to limit the loss) or
    2. Trade with probability to make 25-30% (maybe more) and lose 15-20% (with ability to cut the loss any time you want).

    When I make the trade, the first question I ask is not how much you can win but how much you can lose. Take care of the losers and the winners will take of themself.
    Jan 3, 2012. 08:44 PM | 1 Like Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    If you are doing the strangle, I would definitely wait. usually they report one day before the options expiration.
    Jan 3, 2012. 07:55 PM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    Like I mentioned, the theta is -11 and vega +12. So each percent increase in vega will offset the theta, and each additional percent increase in vega will cause $12 gain (per spread).

    This assuming that the stock doesn't move. If the stock does move to 690 within couple of days, the call spread will be worth around $5.00 and the put spread around $0.80. That's 23% gain based on my 4.70 entry (which was not the best possible). If both IV and the stock increase, the gains might be larger.

    But you are correct that timing the entry is very tricky. It's always a fight between theta and vega.
    Jan 3, 2012. 07:53 PM | Likes Like |Link to Comment
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