Earnings trades

IV_Trader · Jan 10, 2006

This thread is for NON DIRECTIONAL short term trades around earnings release dates , neutral long/short straddles/strangles , Calendars and Reverse Calendars.

Examples :

Short DNA (1/10 , ac) strangle
Long CAI (1/18,na) combo
Long HTCH (1/18 , ac) combo

I will post the real # later , if conditions are still favorable

IV_Trader · Jan 10, 2006

bought HTCH Jan 30 straddle , 1.95$ (ratio 1:1)
bought CAI Jan 60 straddle , 3$ (ratio 1:1)

IV_Trader · Jan 11, 2006

closed DNA short strangle for 1.50$ profit , out of CAI (report moved to 1/25)

fader · Jan 11, 2006

hi - great thread, i have been interested in the subject for a while but haven't gotten around to looking into this in any detail... - if i may ask a couple of questions - does implied volatility tend to rise in the period approaching earnings, and if yes, you believe that it still ends up underpriced? - also, what is your rationale for shorting a strangle vs buying a straddle, is this driven by the options prices you can execute at or do you short a strangle if you believe the impact of earnings will be limited, but still significant enough for you to make a profit? thanks in advance and all the best.

IV_Trader · Jan 11, 2006

Quote from fader:

hi - great thread, i have been interested in the subject for a while but haven't gotten around to looking into this in any detail... - if i may ask a couple of questions - does implied volatility tend to rise in the period approaching earnings, and if yes, you believe that it still ends up underpriced? - also, what is your rationale for shorting a strangle vs buying a straddle, is this driven by the options prices you can execute at or do you short a strangle if you believe the impact of earnings will be limited, but still significant enough for you to make a profit? thanks in advance and all the best.

thanks , fader

short combo > when inflated IV and limited move after earnings
long combo > undervalue IV and/or potential big (up or down) move after report.
A lot of weight > calendar report date position to option's expiration.

fader · Jan 13, 2006

thanks for the comments, i look fwd to following the journal, best of luck with you trades.

IV_Trader · Jan 13, 2006

bought AVCT (1/19) Jan 30 combo ratio 10 puts (85c) to 17 calls (50)

IV_Trader · Jan 13, 2006

Quote from IV_Trader:

bought AVCT (1/19) Jan 30 combo ratio 10 puts (85c) to 17 calls (50)

sold puts for 1.05 , sold calls for 80 c , average combo profit=52 cents.
This was the faster IV spike/trade ever , AVCT posted report date yesterday after close and so many people lined up to buy low volx , unreal

skeweddude · Jan 13, 2006

Quote from IV_Trader:

sold puts for 1.05 , sold calls for 80 c , average combo profit=52 cents.
This was the faster IV spike/trade ever , AVCT posted report date yesterday after close and so many people lined up to buy low volx , unreal

Both of these went up? So you sold in anticipation of them announcing an earnings' date and b/c IV was quiet? How did you know they would schedule earnings prior to expiry?

Nice Trade IMO, sd

IV_Trader · Jan 13, 2006

Quote from skeweddude:

Both of these went up? So you sold in anticipation of them announcing earnings and b/c IV was quiet? How did you know they would schedule earnings prior to expiry?

Nice Trade IMO, sd

yes , both are up big (without any change iin stock's price)
Actually , its much higher now (1.10 for a call and 1.00 for a put) , I close to early , but one never knows...