11 Option Trades In Just 1 Day

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Option trades: For the third time tonight, I'm going to try to record this video, and hopefully, it goes through. It's going to be a little bit longer. I've done it two times now, so hopefully, this is the last time and everything goes through, and my computer doesn't crash on me going through this video.

But, we had a very, very busy day. Lots and lots of earnings trades. Lots going on. It is very easy to get confused and overwhelmed. All I can tell you is, make sure that you take your time, and only do what you feel comfortable doing.

So, do not force trades that you don't feel like doing or that don't fit your risk profile, or you don't understand.

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Take the time now to go through these trades as we go through them together here on this video to learn and understand how and why we're doing it. Everything is very systematic and mechanical and the more and more you watch these video tutorials, or these video updates, every single night, you'll start to feel how systematic everything is.

I mean, it becomes just another day at the office going through this. When I do this, it just happens to be a very busy day for earnings today and tomorrow, okay? So, the first one that we're going to go over is our adjustments in SNDK, which is SanDisk.

So, the stock opened up much higher than expected. It is what it is. That's just how the probabilities sometimes play out.

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So, the first thing that we did to make our adjustment in SanDisk, like I had mentioned in the video last night, is we rolled our 45 calls out to August. So, the way that we did that has we facilitated that roll with a calendar spread. So we bought back our July 4, which is the July weekly options the fourth week of July.

We bought those back, and we resold the August options at the same strike, and magically enough, we took a credit because we did this very, very quick early in the morning. I don't think you were probably able to take credit later on in the afternoon, but we were able to take a credit on this side of the trade which was really good.

The next thing that we did, and I'll show you on the charts, is we then went out to August, and we sold an additional put below the market, right at 62. So, the whole idea here is taking as much premium as possible, go inverted, and try to salvage anything we can get out of this trade hoping that the trade comes back inside of our expected range.

So, here is a look at what happened with SanDisk. Again, the stock opened up beyond the expected move. We left our 54 calls exactly where they were, but we moved up our put options up to 62. So we went inverted here with our put options now trading above our call options.

And all we're trying to do is get the stock to trade inside of this range, between our call and our put, and that's likely going to be the best scenario for us to make a closing trade. So, this is what the profit loss diagram looks like for the August expiration period.

You can see that SanDisk is on edge here but now inside of our kind of break-even points for this half. We love to see the stock move back inside of this range, that would be the ideal situation and scenario. So, hopefully, we can get the stock to move back in here.

Again, we want it to land anywhere between 62 and basically 54, that's exactly where our strikes are, and as long as it comes back in there which, again, it can definitely do, that's statistically the best way to play this thing, then that's what we're going to do. So we're going to hold this thing for a little bit longer and see what we can get out of it.

Had two closing orders today, I'll go over these real quick. We had an automatic closing order in FXE and DIA. DIA was a bearish call credit spread that we had so we were trading it downward. DIA moved down; we finally closed it out at 12-dollar debit, so it took a nice 75-dollar profit on DIA.

Same thing with FXI, we had an iron butterfly, the 109-119 call spread and the 109-99 put spread, so a 10-dollar-wide iron butterfly centered all over 109 on FXE and with the stock trading just a little bit higher today, we were able to close it at 275 debits for a 91-dollar profit on that trade.

So, again, just being very systematic and mechanical with how we get out of things. The first opening order that we had, not an earnings trade. We went ahead and did a strangle right on FCX.

So, FCX announced earnings but implied volatility still stayed high, and option prices didn't go anywhere. The stock saw some resilience I guess, and we didn't see that IB drop as quickly as possible or as we had thought.

And so what we did is we went ahead and sold a very tight strangle around the market, the 14 calls, and then we sold the 13 puts right around the market, took in a dollar-twenty-five credit.

This is out in August, so this is not a weekly option, but the whole goal here with FCX is to take advantage, hopefully, of the fact that implied volatility should drop between now and August and I know my charts are running slow, so hopefully that can load up, here.

So the next earnings trade that we did was in Pandora. This one is very similar to two other earnings trades that we did in Starbucks and then also one below that we also did in JNPR.

So, these I'm going over these together because they're all pretty much the same. It's the same mechanics that we went through on each and every one of these, but the whole idea is that with doing the straddle on each of these, it's because implied volatility is high.

We're talking above the 70th percentile. Now regardless of whether these play out and they work this time or next time or whatever, statistically and probability-wise, this is the absolute best trade that we can make.

When implied volatility is high when option premium- You can tell I've done this video three times now, right? When implied volatility is high, when option premiums are high, these are the types of trades that you can't run away from.

You have to aggressively go after these types of trades and sell options right at the money. So that's exactly what we did right here with all three of these. With Pandora, we sold the 14 call and the 14 put, took in a huge credit of 138, that was the expected move.

With Starbucks, we again sold the 56.5 call which is right at the money, the 56.5 put, took in a huge credit 249. Again, right at the expected move. And the same thing with JNPR, we sold the 26.5 call, and the 26.5 put right where the stock was trading and took in credit that was equal to the expected move.

So, for all three of these securities, we are doing this because of implied volatility, again, very, very high. So, here's a look at FCX, just now that the charts lit up.

Again, you can see implied volatility even post-earnings is real, really high here, so that's helping in our favor. And again, low price stocks, so the margin is not going to kill us to hold this trade overnight or a couple of days.

Hopefully, we should get a nice drop in implied volatility here in the next couple days. Pandora, as soon as the charts lit up, you can see the stock is basically in the teens, so again, doesn't cost us a lot of money to hold this thing in the margin. Implied volatility, really high in Pandora, so went ahead and sold the straddle right over the market.

Same thing with Starbucks. Again, lower price security in the 56-dollar range so it's not going to cost us a lot to hold this thing in the margin and implied volatility was, again, really, really high.

And again, Sorry the charts are not loading up, it's just a recurring theme tonight with trying to get everything loaded. All right, so the other trades that we went through or that we entered today are iron condors.

So, these are trades that we decided to be a little bit less aggressive on because implied volatility wasn't as great. And that's really how I kind of structure most of my trades.

If implied volatility is favorable, I'm going to be more aggressive. If it's just over the 50th percentile or maybe in the 60th percentile, low end, then maybe I'll be a little bit more conservative and do a very wide iron condor.

So, in the case of TRIP, which is TripAdvisor, we did the 102-104 call spread way above the market, and the 84-82 put spread way below the market for a 55-dollar credit.

So, two-dollar-wide spread, that's the width of the strikes, took in a nice premium of about 55 dollars. In Visa, we did things a little bit more narrow. Visa tends to be a big mover, so we wanted to do things a little bit smaller.

We did the 74-75 call spread, and the 68-67 put spread below the market for a 27-dollar credit. Little bit lower credit than we wanted to, but it still gets us beyond the expected move, and hopefully that might work out as well.

And it looks like Starbucks is still not loading up, here. So, let's see if we can't get some of these other securities to load up as we keep going here. Okay, and then the other one that we did obviously was Amazon.

I know this one came out late, we got a late fill as well, so you guys know I always push these things out as soon as they come in. It's automatically linked to my trading account. So, as soon as any of these trades go through in our place, then they immediately go out to you guys.

So, there's no delay on my end, but sometimes we get filled towards the end of the day. Amazon was all over the place today, and again, we wanted to do a wide iron condor in Amazon only because in this case, Amazon did have higher implied volatility, but with the stock price around 480 dollars, it just wasn't feasible to sell a strangle or straddle.

The margin to do that type of position would eat up a lot of buying power. So what we decided to do instead is do a wide iron condor in Amazon. Again, just because the stock price is so high, we couldn't do a straddle or strangle.

We went ahead and did the 530-530 call spread; the 430-425 put spread for a nice credit of about 187. So hopefully this loads up. Okay, good. So, here's a look at Amazon, again, really high implied volatility.

Wish we could have done the straddle or strangle but just costs way, way, way too much money to go ahead and do that. But with Amazon, I think actually after hours, the stock ...

As far as I remember, the stock was trading much higher than ... Yeah, so I think after hours stock was trading around 525 or so. So, definitely beyond or maybe even beyond that.

Let me just see here if we can see where Amazon was trading after hours. Yeah, so Amazon actually closed in after hours trading up around 565, so this is a good example of what we're going to do.

Again, very similar to SanDisk, so let me just move this kind of cursor up here. So, Amazon right now, this is our iron condor in Amazon, and you can see that the stock made a move almost double the expected move, so huge, huge move in the stock.

And we'll see what happens actually when it opens tomorrow, but likely it'll probably open somewhere around this range. So, obviously this isn't good for this position, but we took in a big credit so our loss isn't going to be huge and we've had other winning trades.

But we just have to roll with this, right? So again, just as a recap and this goes for every single trade that we're going to have tomorrow, the adjustment techniques on earnings trades are very, very similar.

They're almost identical; it just depends on if you're doing the iron condor versus the strangle or straddle if you roll one contract or roll and create spreads, okay? So again, review the earnings trading section, review the earnings trade guide that we have available in the downloads section. It's right available on the membership dashboard.

But again, the strategy for tomorrow is going to be since Amazon has tested the call side here, what we're going to do is we're going to roll out the call side to the monthly options, okay?

So we have these calls, we're going to roll the 50 or 530-535 call spread, we're going to roll that out to the August monthlies, and we're going to do the same strike prices, okay?

So we're not going to change anything, we're going to do the same strike prices, 530-535, but this time in August. The put options that we have currently on the weeklies we're just going to let expire.

Those are all the way down below the market; there's no point in using your commission to buy those back. Now, what we're going to do in August once we have the August position for 530-535, is we're going to try then to sell something very, very close to where the stock or where our current strike prices are.

So, we're going to try to sell the 530-525 and create a butterfly right over the market, okay? Now the whole goal obviously is to take in a credit overall to do this type of adjustment, and that means that after we roll out the call spread and after we add this additional put spread out in August, we want to take in credit.

If we cannot take in credit, there's no point in doing it. It's best to take the loss and move on. But if we can take in credit, then we give ourselves an opportunity for Amazon maybe to come back inside of that range and for us to close it out at a smaller loss or profit.

And again, it's happened before in the past, it doesn't happen all the time, but if we can roll it out for a credit and reduce risk and give ourselves more time for maybe Amazon to swing in our favor, then we're going to do that.

If we can't roll it for credit, then we are not going to enter the trade, we would rather take the loss now than ensure ourselves of taking a greater loss by paying to go out to the next monthly option, okay?

So again, that's exactly the strategy that we're going to use. Pandora, very similar, I think Pandora's trading may be just beyond our break even points.

But again, what we're going to do is we're going to just roll out the call side of Pandora, we're going to roll that out to the next monthly contracts in August, let the put side expire, and then we're going to move up our put side and go a little bit inverted in Pandora in the next August contracts, very similar to what we did with SanDisk, okay?

So again, the whole idea with all these earnings trades is two things. One, you want to do everything for credit. If you can't adjust for a net credit, and that means both sides, that means after everything is said and done, you're new position is established, it had better be for a net credit.

If you can't do it for a net credit, that means you're paying for more time, and that doesn't do you any good, right? You're better off just to take the loss. So that's the first thing, we always want to get that credit.

The second thing is that we always want to try to get more time. So if we can extend the trading duration or time another 30 days, that gives us an opportunity to see the stock swing into our favor.

Leaving everything on for the weeklies does us nothing because the contracts expire tomorrow. So, we have to get these trades out to the next month and give ourselves a shot at possibly making some money back on the ones that go wrong and the ones that obviously are profitable, we'll close those out early tomorrow.

I think TripAdvisor, Starbucks should be one. JNPR is close as well, okay? So hopefully that makes sense and hopefully that kind of clears the air. I know there's a lot of earnings trades, we'll kind of recap everything again tomorrow as we keep going.

But again, I encourage everyone, because I got a ton of questions today, I tried to field as many as I possible could, to go back through the earnings trading module, read through those tutorials, watch catch studies of earnings trades that we've done before in the past. It's really good to go back through it and give yourself a refresher.

And take your time on these trades, you don't need to be frantic, running around like a chicken with your head cut off trying to get in orders and not think through the process.

I know I dealt with a lot of people today who were just fat-fingered with their triggers, entering trades and didn't really know what they were doing or didn't think through the process and now they take a step back and realize exactly all the changes that they could have made and it's very simple fixes, okay?

So hope everyone enjoys tonight's video, as always if you have any comments or questions please add them right below and until next time, happy trading.

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.