The IV of each appears to be at the lower end of the range. Also IV in these stocks do tend to rise going into earnings although not like in the good old days of tech rallies lol.
My only comment without looking each one up on a risk chart is for you to check the breakeven points and risk picture and compare it to how the stocks have moves in the past. My initial opinion may be that these stocks may not move as big so just take that into consideration. That is the 2nd part of my subjective screen for placing these trades.
For example, AMZN would need to move above $42 and below $32 to have a profit at DEC expiration, although you need not close it then. YOu could keep rolling credits each month until AMZN mvoes as expected or vols increase as expected. So not bad but just keep in mind the range of moves the underlying is normally capable of.
Last point is that it is good to test these out in small quantities but be aware that using 1 and 2 contracts produces small vegas and deltas and very little profit unless the underlying moves a great deal. Of course the max loss is less to so it works both ways. For example, at DEC expiration max loss with no vol increase is $150. Focus on the % return for now and not the cash since this strategy is scalable for more contracts. But do not trade over your head.
Finally, I think the key to this strategy is havng a diversified group of positions spread out so that you are not loaded up in one or dependent on one. One or two will produce nice returns, one or two will move no where and produce limted losses and the rest will fall in between depending on stock selection and IV changes. For example, as of Friday my RIMM had about a 10% return while others were flat or slightly down. It is too early to take profits or count losses but the different positions will hopefully produce net positive results if I have chosen correctly.
Many of these stocks announce earnings in JAN or FEB and unfortunately most are not listing JAN or FEB months so I am going with MAR or APR. The vol spikes will not be as much but I am still expecting some overall vol shift higher.
Moreover, I can roll the short DEC into JAN and FEB and actually use the vol spikes to sell more premium if I am still in the position, so either way the vol spike will be an asset to the position.
Keep up the research and keep the positions 1 and 2 contracts for now to test or paper trade them.
Quote from jychiu:
Following the same ideas, it has the same risk graph pattern:
1) AMZN at $39.26 on 10 Nov
Past 1 year IV range 25-65%, now 29.4%, margin $1.4k
STO 1 Dec $42.5 Call $0.35
BTO 2 Apr $40 Call $3.7
BTO 2 Apr $40 Put $3.7
STO 1 Dec $35 Put $0.2
Next earning on 2 Feb 2007
2) YHOO at $27.39 on 10 Nov
Past 1 year IV range 26-50%, now 32.5%, margin $1.0k
STO 1 Dec $30 Call $0.3
BTO 2 Apr $27.5 Call $2.75
BTO 2 Apr $27.5 Put $2.3
STO 1 Dec $22.5 Put $0.05
Next earning on ? Jan 2007 ?
3) EBAY at $32.81 on 10 NOv
Past 1 year IV range 27-58%, now 31.7%, margin $1.2k
STO 1 Dec $35 Call $0.5
BTO 2 Apr $32.5 Call $3.6
BTO 2 Apr $32.5 Put $2.85
STO 1 Dec $27.5 Put $0.1
Next earning on 18 Jan 2007
Any comment ?
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