4 New Earnings Trades to Consider for Your Portfolio

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Earnings trades: In tonight's video, we're going to go over all the trades we made for Tuesday, November 3rd. So, just had a handful of opening earnings trades. As always, with the new platform and layout, you can see how the earnings trades look because they are designated by this outlook down here that's tagged as earnings.

Obviously, they're going to be opening trades and ending ... Of course in the comments, you'll see that we're mostly going to talk mostly about expected move, earnings trading stuff, etc., etc.

Related "Earnings Trades" Resources:

earnings trades

So, in this case, we entered our first trade today in X. That was our straddle trade; we have a $1.33 credit on this trade. Again, we're using the weekly option which is Nov 1, 2015. So the Nov 1 means that they expire the first Friday in November which is this coming up Friday.

And we wanted to do things, again, a little bit more aggressive because implied volatility's in the 95th percentile. So we went ahead and sold both the 12.5 call and put. The stock was trading at about 12.5 at the time, and again our break-even point is $1.33 outside of that move on either end.

Now here's a look at what happened after hours with U.S. Steel. The stock closed, again, around 250 or so. And then after hours, it's trading down around 1140. That's kind of where it ended the day. So it ends up being a move that's inside the expected range. So, again stock is trading somewhere in here around 1140, 1150.

Again, everything that we had was centered over 12.5 where the stock kind of ended the day. So it looks like the U.S. Steel made a move that was less than expected so we should be able to take this one off at a profit tomorrow in the open.

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The next trade that we have was in Tesla. This was a really good one-two; I like this one. 73rd percentile rank ... Again, high probability trade here ... Small allocation, and of course earnings trade. Went ahead and did the Iron Condor in Tesla because it's a high priced stock.

So it'd be hard to hold a straddle or a strangle when the stock price is 200 plus, and it's just really hard to hold that margin. So we sold the 235 240 call spread, and the 185 180 put spread. In both cases, we were selling options that were a little bit further away from the money on either end. About the 12% probability range on either end...

Just trying to give ourselves as much room as possible. So really we want Tesla to move between our short strikes which are the 235 call and the 185 put. Now, after hours Tesla is trading higher but is trading higher less than expected. The stock actually ended the after-hours session around 227.

Again, our strike prices are up here around 235. So although it did come close, after hours, it's trading well inside the expected move, which is good. So it looks like it should be, again, another popular trade for this go around. The other trade that we had was KRS which is Michael Kors.

Went ahead and did the aggressive straddle again in this type of trading position because implied volatility is at the 100 rank and has never been lower over the last year ... or never been higher than it is right now over the last year. So it's extremely high implied volatility. You have to favor these types of aggressive strategies even though it might be tough to do so because you get paid a lot more money to do it.

In this case, we took in a nice 405 credit. We did the 39.5 call and put on either side. I don't know if they've announced earnings already. I think they have announced earnings already. Trading up a little bit around 39 91 or so. I don't know if they're going to announce earnings now or tomorrow morning. But, it should be a good trade.

We like the trade. We like the implied volatility play. Honestly, even if this trade goes against us ... Even if this trade goes against us ... The fact that it's a 100th IV percentile rank, you have to do the straddle every single time ... Or at least the Iron Butterfly. So, if you're the type of person who needs to do the Iron Butterfly in this case because you can't trade straddles and strangles, you still do the 39.5 call and put it on either end.

On the call side, you go a couple strikes higher, and you buy options. On the put options, you go a couple of strikes lower, and you sell options ... Or you buy options a couple strikes lower. That gives you that risk-defined Iron Butterfly. And the last trade that we did today was in DDDD; we also did the straddle in DDDD ...

Implied volatility in the 99th percentile. The stock was trading about 10.5, that's where we want to place the trade. We took in a nice big credit of $1.40. I like this trade, again, because the high implied volatility stock has not made the announcement after hours. So it's trading unchanged from the day.

We'll see what happens tomorrow when the stock opens up. But nice liquidity in this thing ... It's not insanely liquid but good enough to get into this trade. And I think well-enough implied volatility and pricing to make this trade worth it. So, as always ... Hope you guys enjoy these videos.

We'll obviously keep you guys updated tomorrow as we start exiting trades right after the open. 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.