AMZN strangle after earnings - a thought about others as well.
- Thread starter JJacksET4
- Start date
JJacks,
Following up on the above, you have to have a firm idea of what you are going to do before the post EA opening and/or a really good analysis set up because you have to process and execute quickly since price can be a moving target in a fast market. You don't get to work the order in a calm environment as you would the afternoon before the EA nor do you have the luxury of time for lengthy analysis.
I used to do a lot ofthese and in the late pre-market, I'd be inputting the UL's price into a pricing program and modeling various opening IV levels so I'd have a feel for where my trigger points might be. Then I'd set the orders up, set some price alerts and wait for the show to start. Even with the prep, at 9:30 it's a fast market and decisions have to be quick especially when price doesn't cooperate and you have to adjust on the fly. It's a lot harder in real time
Tonight After the bell, RIMM reported earnings.
So far the stock is down 6.48 to 50.11 according to Yahoo at 7:43 EST.
IF (and only IF) RIMM were to open very, very close to 50.00, it would be interesting to see what the 50 straddles for Apr (now only 1 day left) would cost. If they were very cheap, it might be an interesting play. I would try do it at least with Virtual trading, but I won't be able to be at my PC right away at 6:30AM Pacific Time.
If it is extremely close to 50.00 in pre-market, the idea would be to have the trade order already filled out and ready to go with a low limit price of course. Then I think the best thing might be to place a limit sell order for at least 50% profit and/or walk away and come back at about 3:00 EST and close the position for whatever it's worth at that point (what are the odds it would be right at 50.00 still?).
If it isn't very, very close to 50.00, then I would skip it as the strangles aren't close enough IMO for a $50 stock with only one day left in the options.
Of course, since there is only 1 day left for the weeklys it would be a riskier trade then if there were more.
JJacksET4
So far the stock is down 6.48 to 50.11 according to Yahoo at 7:43 EST.
IF (and only IF) RIMM were to open very, very close to 50.00, it would be interesting to see what the 50 straddles for Apr (now only 1 day left) would cost. If they were very cheap, it might be an interesting play. I would try do it at least with Virtual trading, but I won't be able to be at my PC right away at 6:30AM Pacific Time.
If it is extremely close to 50.00 in pre-market, the idea would be to have the trade order already filled out and ready to go with a low limit price of course. Then I think the best thing might be to place a limit sell order for at least 50% profit and/or walk away and come back at about 3:00 EST and close the position for whatever it's worth at that point (what are the odds it would be right at 50.00 still?).
If it isn't very, very close to 50.00, then I would skip it as the strangles aren't close enough IMO for a $50 stock with only one day left in the options.
Of course, since there is only 1 day left for the weeklys it would be a riskier trade then if there were more.
JJacksET4
JJacksET4 ....... the play I assume would be to buy at open:
RIMM Apr 2011 50.000 puts
http://finance.yahoo.com/q?s=RIMM110429P00050000
Then sell at close. I think a strangle would be too expensive - go with the direction, which is down.
Very interesting trade.
RIMM Apr 2011 50.000 puts
http://finance.yahoo.com/q?s=RIMM110429P00050000
Then sell at close. I think a strangle would be too expensive - go with the direction, which is down.
Very interesting trade.
Well,
There is always a possibility of a rebound in RIMM tomorrow (I have no view on the stock either way). Also, we don't know what those puts will cost tomorrow yet if RIMM opens at $50.00.
So, the idea (if they are cheap!) would be to buy the straddle - the 50 puts and the 50 calls. Remember AMZN opened up just barely on Wed. after their earnings and ended up about $14 on the day! I don't expect anything like that from RIMM, but certainly it could go up or down somewhat after the open.
JJacksET4
Forex,
I see you added "I think a strangle would be too expensive - go with the direction, which is down."
Of course, then you are making it a directional play which may or may not be OK. We just don't know what the puts and calls will cost assuming RIMM did open about $50.00.
If someone feels like it maybe they can guestimate and then follow to see what the numbers really are tomorrow. Fun to watch anyway.
JJacksET4
I see you added "I think a strangle would be too expensive - go with the direction, which is down."
Of course, then you are making it a directional play which may or may not be OK. We just don't know what the puts and calls will cost assuming RIMM did open about $50.00.
If someone feels like it maybe they can guestimate and then follow to see what the numbers really are tomorrow. Fun to watch anyway.
JJacksET4
I notice that during a big move in AH that a stock usually will continue in that direction the next day. RIMM does appear to be in trouble.
My call is Buy the 50 puts at 6:45am sell at 3:45pm. A strangle will add too much to this trade. A rebound of the stock would probally also kill the strangle - so I think this must be a directional play.
That is certainly possible. It happened just recently with BRCM. The only thing to fear is an upgrade or some good news coming out of the company.
Just as a note, if RIMM opened at EXACTLY 50.00, I did a quick calc, and predict the puts and calls each to be about $25-$40, so a straddle would be $50-$80 in that case. Still leaves room for profit if there was a $1 move in the underlying.
JJacksET4
Just another quick study using RIMM here:
(All numbers according to Yahoo - sorry if any typos or errors!)
Apr 27th close - 55.57
Apr 55 Call close - $81
Apr 55 Put close - $22
Straddle cost $103
First of all, with earnings coming tonight (28th) I am surprised looking at this that they were that cheap.
Today RIMM went as high as 57.32, and prices at that time were probably:
Apr 55 Call - $237 (Day high according to Yahoo)
Apr 55 Put - $5 (Day low according to Yahoo)
Straddle value ~ $230
Stock closed at $56.59
Apr 55 Call - $167 (Last according to Yahoo)
Apr 55 Put - $7 (Last according to Yahoo)
Straddle value ~ $170
Either way a profit. Of course, if these were held, now you would probably really be happy with RIMM at ~ $50.00 in After hours, meaning the puts should open ~$500 if all remains the same. Just to mention it, during the days High range, if a person had done a qty of this straddle, they could have sold half and left the other half as a free be for the earnings report.
Again, I am a bit shocked the Aprs were that cheap with 2 full days including an earnings report to go. I always seem to find this stuff too late though
. I'll be looking more now though.
JJacksET4
(All numbers according to Yahoo - sorry if any typos or errors!)
Apr 27th close - 55.57
Apr 55 Call close - $81
Apr 55 Put close - $22
Straddle cost $103
First of all, with earnings coming tonight (28th) I am surprised looking at this that they were that cheap.
Today RIMM went as high as 57.32, and prices at that time were probably:
Apr 55 Call - $237 (Day high according to Yahoo)
Apr 55 Put - $5 (Day low according to Yahoo)
Straddle value ~ $230
Stock closed at $56.59
Apr 55 Call - $167 (Last according to Yahoo)
Apr 55 Put - $7 (Last according to Yahoo)
Straddle value ~ $170
Either way a profit. Of course, if these were held, now you would probably really be happy with RIMM at ~ $50.00 in After hours, meaning the puts should open ~$500 if all remains the same. Just to mention it, during the days High range, if a person had done a qty of this straddle, they could have sold half and left the other half as a free be for the earnings report.
Again, I am a bit shocked the Aprs were that cheap with 2 full days including an earnings report to go. I always seem to find this stuff too late though
. I'll be looking more now though. JJacksET4