$90 Profit on CSCO Earnings Trade

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Earnings trading: In tonight’s video, we’re going to go over all the trades. Two closing trades, I guess the all two closing trades that we had on Thursday, May 14th. Just as a reminder, if you're a premium member, you'll obviously get a notification for all the details for this because it’s included in your membership.

But if you're not a premium member and you want to jump on our next webinar coming up, it’s going to be on making smart trade adjustments. And this is something that's been requested. A lot of people have been interested in how we make trade adjustments, how we take trades like GoPro which we just closed out of yesterday that was completely against us, entirely in the red, and turned it around and made it into a winning trade.

That's what we’re going to be talking about, this whole technique of adjusting, how you set up alerts to do it, and looking through a lot of case studies. And again, we’re going to be doing this next Wednesday at 9 o'clock Eastern, 6:00 Pacific. And right now, I think there’s only probably about 18 slots left.

I haven't updated the website yet to show this, but I think about 18 or 17 slots left if you're not a premium member. Just go to optionalpha.com/webinars, and you can get to it from any of the navigation links on the website.

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Like I said, today we’re just going to be covering the two trades that we closed out of. The first one is our Cisco earnings trade. This trade was an easy trade to get out of. I mean, I wish honestly all the trades that we had in the earnings season were like this, but that’s not going ever to happen I guess.

But we went ahead and just bought back our straddle very soon after the market opened, had a nice $90 profit on this trade. And really with Cisco, we saw implied volatility drop as a result of earnings, that’s exactly what we want to see, and the stock opened exactly where it closed the other day.

No movement in the stock, even though the market was predicting about $1.30 move. The stock only ended up closing down about $.30, so much less than expected and sits in the wheelhouse. I’m very glad that we made that trade. We’re pretty ultra aggressive with our strategy selection. We went ahead and did the straddle because implied volatility was high versus something like a strangle or an iron condor and it paid off.

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As far as USO, we closed out of just the remaining long options that we had. We bought back basically a strangle which is just the two long options that we had, the 18 calls that were in the money and the 21 ½ puts that were in the money for a 355 debit. Now, after all of our trading in USO…

And I can’t remember if I have recapped some of the USO trades before because I think at one point, we had three iron condors going in USO in some form or another in May, some we took off for a profit, some we took off for a loss. This wraps up all of USO for May. It took a 109 loss after all adjustments and trades that we had in USO.

Really with USO, we did play implied volatility the right direction. We just ended up placing a lot of trades back here at the beginning of April that was for May expiration and a lot of these trades were ultra, ultra aggressive, sideways action. And since USO has traded higher, one or two of those iron condors that we had were tested.

We placed pretty aggressive trades, looking for USO to stay range bound as implied volatility dropped. And since it’s just continued to run higher, that’s just apparently tested us. The decrease in implied volatility helped out for sure, but the movement in the stock was just a little bit more than some of those iron condors could handle.

And we did try to adjust out of some of them and reduce our loss which we were able to do, but not completely. That recaps it for today, a very quick and easy video. Again, if you're interested in doing a webinar, it’s going to be next Wednesday, May 20th at 9 o'clock Eastern, 6 PM Pacific. Just go to optionalpha.com/webinars if you're interested in saving your seat. 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.