Riskarb's combo to fly conversion journal

Quote from Cache Landing:

I used to think that too until I got burnt a couple times. I'm pretty cautious now.:)
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if u go blind into them of course, otherwise it is one of the easiest (and certainly da most profitable) season to trade, just buy positive surprises and sell da negative. u might be wrong from time to time but the odds are in your favor.
 
from riskarb , screener's criteria set up ( IB users) :

Filter = Price >=60
Parameter = "Highest option Imp Vol"

Then look at column "Opt Imp Vol" (descending order) for 40+ candidates as described in the beginnig of this journal.

Hope it's helps
 
Quote from Bitstream:

if u go blind into them of course, otherwise it is one of the easiest (and certainly da most profitable) season to trade, just buy positive surprises and sell da negative. u might be wrong from time to time but the odds are in your favor.
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Huh? How are the odds in your favor? If I have a hunch of a beat(pos. surprise) go long the day before, if I'm speculating a miss go short? How is that anything other than gambling?

I'm not being critical, just trying to understand it. If you have some hard won knowledge u'd like to share, by all means, do tell!:)
 
One way of doing this is to bet that a poorly performing company will surprise positively, or that a high flier will disappoint. There's no sure way of predicting it, but you'd get a bigger bang for your buck than if you bet the other way. A positive surprise of a high flier, as well as a negative surprise of a loser will have less effect on their stock price.

To increase your odds you could open an OTM bull spread to bet on a positive surprise (poor performers), and an OTM bear spread to bet on a negative surprise. Credit and debit spreads being synthetically equivalent, it doesn't matter which one you choose as long as you don't find an unarbitraged opportunity, but I prefer debit spreads because the interest rate factored into the option prices is always better than the one I get for my cash from my broker.
Quote from volatilitypimp:

Huh? How are the odds in your favor? If I have a hunch of a beat(pos. surprise) go long the day before, if I'm speculating a miss go short? How is that anything other than gambling?

I'm not being critical, just trying to understand it. If you have some hard won knowledge u'd like to share, by all means, do tell!:)
Quote from Bitstream:

if u go blind into them of course, otherwise it is one of the easiest (and certainly da most profitable) season to trade, just buy positive surprises and sell da negative. u might be wrong from time to time but the odds are in your favor.
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Quote from cnms2:

One way of doing this is to bet that a poorly performing company will surprise positively, or that a high flier will disappoint. There's no sure way of predicting it, but you'd get a bigger bang for your buck than if you bet the other way. A positive surprise of a high flier, as well as a negative surprise of a loser will have less effect on their stock price.

To increase your odds you could open an OTM bull spread to bet on a positive surprise (poor performers), and an OTM bear spread to bet on a negative surprise. Credit and debit spreads being synthetically equivalent, it doesn't matter which one you choose as long as you don't find an unarbitraged opportunity, but I prefer debit spreads because the interest rate factored into the option prices is always better than the one I get for my cash from my broker.
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In my experience I'm going to have to agree. Bet against the higher fliers and for the laggards. When a stock is a "high flier" there is a lot of room for downgrades when the report isn't quite good enough. The opposite is true for laggards. You definitely get more bang for your buck.

Another semi-reliable way to get a jump on it is to be patient and play the sectors independantly. Wait for the first couple significant companies in a sector to post earnings and look at the reaction. If everyone wants amazing results from the first few companies they are going to want amazing results from those that follow. But you have to know your companies. For example, if PALM came out positive and gapped up, I would expect RIMM to fall because it is losing market share. On the other hand if you are following internet companies (like ebay) then what is good for one is usually good for all.

Anyway, playing earnings on a hunch really is the closest you can get to gambling in the options game. You are fighting an almost certain IV collapse which generally rules out a straddle, so you have to forecast direction, which is extremely hard to do with any degree of consistency. I'm not trying to bag on your style. I used to do the same thing in my more agressive years. Just my opinion based on personal experiences. And I don't want anyone new to options who might be reading this, to jump head first into earnings reports without knowing what they are getting into.:D
 
Quote from cnms2:

Credit and debit spreads being synthetically equivalent, it doesn't matter which one you choose as long as you don't find an unarbitraged opportunity, but I prefer debit spreads because the interest rate factored into the option prices is always better than the one I get for my cash from my broker.
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BTW, which broker do you use?
 
Quote from IV_Trader:

Does anyone planning to trade long GOOG combo today ? Should be a wild day.
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It may not be wild as arbitrage has probably taken place but front month IV's ARE certainly high so It could be a very good candidate...390 straddle get $40 hold for abt 10 days...how did it go:confused: wait you said long...I'm think short
 
Quote from IV_Trader:

Does anyone planning to trade long GOOG combo today ? Should be a wild day.
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I seem to remember reading an article which indicated that most of the block orders are pre-negotiated with IB's -- i.e. the IB's have already accumulated the stock they are going to roll to the index funds. There may not be as much action as you might think as a consequence.
 
Quote from ssternlight:

I seem to remember reading an article which indicated that most of the block orders are pre-negotiated with IB's -- i.e. the IB's have already accumulated the stock they are going to roll to the index funds. There may not be as much action as you might think as a consequence.
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agree , I did not took the trade anyway , too busy with my own trades
 
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