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  • 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
  • My Investment Strategy For 2012 [View article]
    Thanks Monty,

    Opening the condors on down days when IV is up is definitely an advantage, but this is not always possible. There is a fine balance between waiting for IV jump and missing the trade because you waited too long and there is not much time left till expiration
    Jan 3, 2012. 07:44 PM | Likes Like |Link to Comment
  • My Investment Strategy For 2012 [View article]
    Thanks for your comment. So you are from the "future predictors". And if the markets crash like in 2008, you still think AAPL will go higher?
    Jan 3, 2012. 07:41 PM | 1 Like Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    Gary, I agree with you. Hindsight is always 20/20. I definitely agree that 2-3 weeks is usually not good, except maybe for some rare cases like the GOOG trade when the IV is really low AND you do the reverse iron condor to reduce the theta.

    However, Friday was only 6 days before earnings. IV was still VERY low due to slow trading before the new year as we can see on the IV chart. With 3 weeks to expiration, it definitely not too early. And like Augen mentions, the theta is not linear on weekends, otherwise it would be free money.
    Jan 3, 2012. 04:37 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    APOL was actually better to buy on Friday, IV was few points lower. But looks like it is going to rise for the next two days.
    Jan 3, 2012. 04:03 PM | Likes Like |Link to Comment
  • A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
    AAPL is one of the best candidates for this strategy. Since the options are expensive, I might hedge with further OTM strangle, creating reverse iron condor like the one described here - http://seekingalpha.co...

    But AAPL still hasn't confirmed the date - where did you take the info that it's next week?
    Jan 3, 2012. 03:23 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    You can build a combo with pre-defined strategies, strangle/straddle one of them. Right click on the stock and it will open an option for Options Combo.
    Jan 3, 2012. 03:20 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    My MON trade is currently up 7%. The stock is around $72, so 67.5/72.5 would not be delta neutral. If you still want to do it, move the strikes 2.5 points up.

    I entered MOS today (52.5 straddle), I think it is a good trade. Also trying APOL 50/55 at 3.05.
    Jan 3, 2012. 01:59 PM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    I'm in GOOG 610/620/690/700 at $4.70.
    Jan 3, 2012. 01:22 PM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    Debit means that I'm paying for the trade, not getting credit. Credit usually requires margin, debit not.

    The sold strangle is covered by the closer strikes bought strangle.

    BTW, anyone who is intending to take the trade - since GOOG moved, please move the strikes 10 points up.
    Jan 3, 2012. 11:25 AM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    Sorry, straddle. Was a bit inpatient, might get a better price now.
    Jan 3, 2012. 11:15 AM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    I'm in MOS 52.5 strangle at 2.58.
    Jan 3, 2012. 10:35 AM | Likes Like |Link to Comment
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