Earnings journal

[Magic]

Eked out a small gain on CRM, went flat a few minutes after the open. I already bled a little from the unusually strong close; sold $149 strike @ 3:45 and then we jumped to $150. Price looked good after the announcement but the overnight drift up cut into the margin as well.

It was talked about earlier a bit but anyone have some advice good practices for closing these out? I wasn't getting filled on the fly at a reasonable price so I did the orders separately. Any advantage to doing it that way?

Wondering if a better plan might be to hedge to flat deltas right at the open and then wait until 10:00 or something to close everything out, reasoning comms and spread on the shares cost less than trying to close the options in the frenzy.

 

[oldmonk]

Eked out a small gain on CRM, went flat a few minutes after the open. I already bled a little from the unusually strong close; sold $149 strike @ 3:45 and then we jumped to $150. Price looked good after the announcement but the overnight drift up cut into the margin as well.

It was talked about earlier a bit but anyone have some advice good practices for closing these out? I wasn't getting filled on the fly at a reasonable price so I did the orders separately. Any advantage to doing it that way?

Wondering if a better plan might be to hedge to flat deltas right at the open and then wait until 10:00 or something to close everything out, reasoning comms and spread on the shares cost less than trying to close the options in the frenzy.

It's always a problem closing these at the optimal price. Even with the most liquid options. The hedging plan sounds good in theory, but if you're trading weekly options, the delta of the fly is extremely volatile. Add to that the volatility of the stock at the open after ER, I really don't think delta hedging would work as expected.

As far as I know, there's no optimal way to close these trades. I just make up a rule and stick with it. For instance, wait until the first 15 minute bar. The spreads should narrow a bit by then. If it breaks past the opening range, close out immediately. If not, maybe give it some time to come in and close at a better price. There's no edge here, obviously. It's just a way to ensure consistency in my approach.

 

[TheBigShort]

Anyone else looking at MTN on short vol play? It's one of the most expensive I have seen all year. I have a slight bullish bias as well. Short the 220 strikes. Holding both 180 and 185 puts as well as 260 calls (wings).

 

[TheBigShort]

Breaking to new highs on the account today. Have been in a range for the past 2 weeks and took a beating on DLTR last week. Was long a sizeable amount of puts going into the event. Unfortunately after the $10 spike down after hours, the company fully recovered BMO. Even though things played out exactly the way I wanted (DLTR missed on earnings and revised FY guidance lower) I had to close the $3 puts for $.25! ULTA, OKTA and VMW made the money back the next day. I have been trading a lot less as I do not have as much time to do research (most of my research is done at night). Earnings has become a smaller portion of my portfolio for reasons stated above therefore most of my pnl is from mark-market gains/losses on other positions in portfolio.

 

[oldmonk]

Breaking to new highs on the account today. Have been in a range for the past 2 weeks and took a beating on DLTR last week. Was long a sizeable amount of puts going into the event. Unfortunately after the $10 spike down after hours, the company fully recovered BMO. Even though things played out exactly the way I wanted (DLTR missed on earnings and revised FY guidance lower) I had to close the $3 puts for $.25! ULTA, OKTA and VMW made the money back the next day. I have been trading a lot less as I do not have as much time to do research (most of my research is done at night). Earnings has become a smaller portion of my portfolio for reasons stated above therefore most of my pnl is from mark-market gains/losses on other positions in portfolio.
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Great work! Last trade I made was HD a couple weeks back. No earnings trades for me until July. I'm now looking into calendar spreads for pre-earnings trades (short pre-earnings vol, long post-earnings vol), but I won't be making any trades on that until I have something. It always seemed like something that *should* work, but I need to figure out the dynamics before jumping in.

 

[TheBigShort]

Great work! Last trade I made was HD a couple weeks back. No earnings trades for me until July. I'm now looking into calendar spreads for pre-earnings trades (short pre-earnings vol, long post-earnings vol), but I won't be making any trades on that until I have something. It always seemed like something that *should* work, but I need to figure out the dynamics before jumping in.

Thanks OM. I am looking forward to our next Ern season next month. I think Srinir will be back and it looks like Magic will be joining us. This thread has almost 16k views. I think wee have to be a bit more careful what we say around here!
I'll send you PM about this strategy when I get in. Orats has a colum ivExern which strips the event vol out of the total vol. You can than do forward vol calcs to find some good opportu ites!

 

[Magic]

It's always a problem closing these at the optimal price. Even with the most liquid options. The hedging plan sounds good in theory, but if you're trading weekly options, the delta of the fly is extremely volatile. Add to that the volatility of the stock at the open after ER, I really don't think delta hedging would work as expected.

As far as I know, there's no optimal way to close these trades. I just make up a rule and stick with it. For instance, wait until the first 15 minute bar. The spreads should narrow a bit by then. If it breaks past the opening range, close out immediately. If not, maybe give it some time to come in and close at a better price. There's no edge here, obviously. It's just a way to ensure consistency in my approach.

Thanks OM, this is very helpful to keep as a guideline. If we figure we lose as much as gain over a long enough time on holding a customary 15min, then the “edge” is just a matter of being able to bleed less on the spread than the PnL volatility we’re accepting. Seems like a legit premise. Might hurt a bit when a few trades that open near B/E quickly trend away into losers but in the grand scheme sounds like this will lead to better outcomes than a rush to get out. Also will give me some time to jot out some quick calculations to see if vol is sufficiently juiced for the day-of move to consider a longer hold.

@TheBigShort , congrats on the last two weeks! Gains are nice but the smooth curve is the best part. My pathing for a 20% run when I’m fortunate enough to hit it looks a bit uglier when I’m doing shorter-term positions. I need to work on getting more edge

Must have missed MTN when I looked earlier, maybe it just confirmed? I was just looking at buying monthlies that look like they have potential to ramp up a bit more into earnings. Seems like theta bleed is minimal and that’s not even considering that the gamma can offset some of it. Edge might not be as pronounced as trading a good earnings opp but with less risk we could lean into these more. Eyeing LZB and HRB for something like this and didn’t get to metrics for contrasting long straddle vs. short calendar yet.

Also, if the journal is flooded and there’s talk / work better done behind the curtain please don’t hesitate to drop me a line if I can contribute in any way.

Good trading guys!!

 

[Magic]

MTN looks good so far--I'm in it as well. Interested to see how much vol comes out of the options though--only concern was if the Imp Mv / Jump was so high because a lot of the vol was priced in for the intraday move following earnings after how it behaved in Dec.

Edit - Spoke too soon? Climbing above 230 now—guess we’ll have to see where it settles. Your skew to the 220 strike added a good boost to the position. I actually was going to ratio but didn’t get filled on my resting 210 strike order before close o.o

 

[TheBigShort]

MTN looks good so far--I'm in it as well. Interested to see how much vol comes out of the options though--only concern was if the Imp Mv / Jump was so high because a lot of the vol was priced in for the intraday move following earnings after how it behaved in Dec.

MTN usually has their confrence call in the middle of the day. This is the first time they are releasing over night. Therefore you will see vol come all the way in tomorrow morning and a relatively small intraday move.

Confrence call just started. The rest of the vol will be diffused in the next 30 min. If we can make it out this will be a massive winner. Were you also short the 220 strikes?

 

[Magic]

Yeah, only by luck though lol. See edit above. This run has got to taper off soon it’s starting to get unsettling