AAPL weekly strangle

T

turkeyneck

Just bought this strangle before close:

Long AAPL Jul 22 375 Put
Long AAPL Jul 22 380 Call

Net debit: 16.90

Right now the trade is at breakeven AH post earnings. Would you recommend closing the trade at open or close just the put leg and let the call leg ride into expiration?

Thanks!
 
IV is going to collapse in the AM. If it goes to the levels of later months, the put will be 25-50 cts and the call will likely trade near parity since it's almost 3 strikes ITM and so close to exp. If this occurs, your strangle is under water.

If for some reason IV doesn't collapse all the way at the open, you may have a good window for exit. If you hold, it becomes a short term directional trade.

AFAIK, buying anything long at inflated IV pre EA is a tough road to climb because you have to get so much more of a move just to break even.

Closing the put for peanuts in the AM makes sense but holding a very high delta naked call is your call :D
 
Why not put one on a week or two before earnings? IV should be lower and either it gets a chance to drift to one side or the other, or if not you can always sell it the day before when IV is higher.

Edit: I did some paper trade long strangles on GOOG and AAPL. Made out pretty well on GOOG and AAPL is looking good for tomorrow. Put them on about a week before earns. One of these days I might try it with real money.
 
Quote from Eliot Hosewater:

Why not put one on a week or two before earnings? IV should be lower and either it gets a chance to drift to one side or the other, or if not you can always sell it the day before when IV is higher.
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Sometimes that works if you get some move - tho it wouldn't have helped the OP since I fon't thonk that are any "two weeklies" :). He'd have had to go out to Aug exp and that would have done much better with the 15+ pt move since it wasn't as IV inflated.
 
Quote from spindr0:

Sometimes that works if you get some move - tho it wouldn't have helped the OP since I fon't thonk that are any "two weeklies" :). He'd have had to go out to Aug exp and that would have done much better with the 15+ pt move since it wasn't as IV inflated.
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He wouldn't have had to go out to aug although could have. But buying a strangle right before the close on apple with IV at a high point isn't smart. The smarter play on the weekly would have been to get in thursday or friday last week before the IV started to pop, would have made a significant profit as opposed to possibly just a small profit/b.e./loss because of IV drop
 
Quote from SCI new york:

He wouldn't have had to go out to aug although could have. But buying a strangle right before the close on apple with IV at a high point isn't smart. The smarter play on the weekly would have been to get in thursday or friday last week before the IV started to pop, would have made a significant profit as opposed to possibly just a small profit/b.e./loss because of IV drop
More...
I can't speak for the behavior of the Weekly's since I don't follow them.

I used to do a lot of diagonal EA plays (straddles and strangles) and we explored buying the far month sooner to benefit from the increasing IV and selling the near month just before the EA to capture to the inflated IV. It sounds really good on paper but it was by no means a given that it worked.

For many, far month IV expansion began weeks (sometimes a month+ before the EA) and double sided time decay negated that benefit.
 
Quote from SCI new york:

He wouldn't have had to go out to aug although could have. But buying a strangle right before the close on apple with IV at a high point isn't smart. The smarter play on the weekly would have been to get in thursday or friday last week before the IV started to pop, would have made a significant profit as opposed to possibly just a small profit/b.e./loss because of IV drop
More...
I can't speak for the behavior of the Weekly's since I don't follow them.

I used to do a lot of diagonal EA plays (straddles and strangles) and we explored buying the far month sooner to benefit from the increasing IV and selling the near month just before the EA to capture to the inflated IV. It sounds really good on paper but it was by no means a given that it worked.

For many, far month IV expansion began weeks (sometimes a month+ before the EA) and double sided time decay negated that benefit.
 
Quote from spindr0:

I can't speak for the behavior of the Weekly's since I don't follow them.

I used to do a lot of diagonal EA plays (straddles and strangles) and we explored buying the far month sooner to benefit from the increasing IV and selling the near month just before the EA to capture to the inflated IV. It sounds really good on paper but it was by no means a given that it worked.

For many, far month IV expansion began weeks (sometimes a month+ before the EA) and double sided time decay negated that benefit.
More...


Apple options are in a whole other world. I've traded them for a while and no 2 scenarios are alike. Sometimes its great, sometimes its the worst thing ever.
 
I've written strangles on GOOG the day of the EA and closed them out the next morning, GOOG has their EA the thursday afternoon before expiration day. In my experience it's like everything else, sometimes it works, sometimes it doesn't. IV on GOOG options that thursday afternoon is usually through the roof though.
 
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