Quick Earning Trade Exits for Scratch in WMT & HD

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Earnings trade: In tonight's video, we're just going to go quickly over the two closing trades that we had today both in Home Depot and Walmart. Like I said, these were two earnings trades that we entered yesterday.

As always, when you're logged into the membership site, you can see all the running trades, and you can see we had two of these opening orders, both in Walmart and then Home Depot. Trying to play earnings in both of these securities.

Related "Earnings Trade" Resources:

earnings trade

Today, we ended up closing out of Walmart right after the market opened. Walmart moved higher, a little bit higher than expected, but we were able to get out of this trade for a quick little profit, just basically a scratch after earnings.

Again, just buying this thing back very early in the morning, you can see how quickly we tried to get out of these trades because we're not trying to make any directional assumption and hold on to the trade much longer.

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We just want to capture that drop in implied volatility, and you can see, in this case, we did capture it. We bought back the options when implied volatility was in the 59th percentile, and we sold it when it was on the 94th yesterday. We did capture that drop in implied volatility, but the stock just moved a little bit against us so, we weren't able to get more out of the trade profit-wise.

Home Depot, completely a scratch. Ended up closing out the trade the exact the same credit that we got into. Again, we captured that implied volatility drop, but the stock moved more than expected and so, implied volatility in this case actually saved us a little bit from this trade, still leaving us an opportunity to get out basically with the credit that we got into.

Ended up being a scratch. Doesn't count as a win or loss in our column, at least for our portfolio section that we do track stats now on, but we'll move on to more trades this week. I know we've got some other earning trades that are coming up. Obviously, we'll keep everyone updated.

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.