Trade Details & Summary

COH Iron Butterfly (LIVE Closing Earnings Trade)

Shortly after the market open we close out of our COH earnings trade for about a $160 profit, leaving just 1 leg on to expire worthless.


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Alright, this is a live video recording. The market is going to open here in about eight seconds, and we’ve got a trade here going in Coach. You can see nothing is working right now until the market opens which it just did.

Now, this is so live that my kid is screaming in the background, crying. She’s with her mother right now. But Coach had announced earnings before the close today. You can see it opened up and gapped lower, but it did not move as far as our expected range here which was down to around 39.5.

Now that the markets opened, we’re going just to try to actively close out of this earnings trade. Now, what we typically like to do with earnings trades like this is just buy back the inside legs that are going to be… Those are going to be our in the money legs with an iron butterfly like this.

This would be our 41.5 calls and our 41.5 put. We want to buy those back and close out those inside short legs, and we’ll probably try to leave on (depending on where the pricing comes out at) these long legs to expire worthless because they’re just so far out of the money from where the stock is right now.

Right now, you can see… Like I said, this is all live, real-time, the markets already opened here for Coach, and right now, there’s some trading going on. Coach is trading down to around $40 or so, but a lot of the options haven’t started trading just yet.

And we’ll start to see a lot more activity come into the options here hopefully soon. And this is usually what I do, so I’m just recording this and talking through this as I wait for more activity to come into the market.

But once we start to see more options activity come in which now you’re starting to see across the board, that should change the pricing of a lot of things as options players get in the market and contracts get filled.

Now you can see a lot of the contracts are starting to get filled, so we should have a little bit of a profit here now right with Coach. And you can see that just happened before your eyes here. And now you know that these long out of the money legs, they’re not worth a lot.

In fact, the 38 puts are worth a little bit of money, but the 45 calls, they’re not worth a lot at all, so we’re not going to close out the 45 calls. What we’ll try to do here is just close out of the inside legs and then try to sell back this 32 put for a little bit of money since we can get something out of it.

We don’t want to let that expire. That would give us about a $50 additional loss on top of it. The first thing that we’re going to do here is we're going to try to create just a little bit of a custom order. We’re going to buyback our 41.5 calls and puts, both of them.

I just click twice on the 41.5 calls, click twice on the 41.5 puts, and then like I said, we’re going to try to sell out of the 38 puts as well. This is going to create a custom order to get us out at about a 140 debit across the board, so it’s a little bit about $1 less than what the market is because of this 45 call here.

If we can get this thing filled for about 140 or so, 150… We can see the markets moving here. I’m just seeing where the pricing is going to end up. We should be here with a nice little profit across the board.

We'll try here at 140 and see if we can get this thing filled at 140. And that order just went in. You know it was a custom order. The market is trading a little bit lower than that, so it actually should fill pretty quickly here. But we’re just going to wait and see.

And boom! We’re out. This all happened live time, so we’re out here at 140. That means we took in about $160 profit on this trade. We just left on the long 45 calls to expire worthless. Those are not worth anything. They’re worth about $5, but it’s just not worth closing out that position.

At this point, it looks like it's going to be an excellent trade, about a $160 profit on this thing after everything is said and done. Hopefully, the video is helpful to understand the process we use to go through closing trades when earnings come out.

The key here is just to wait a little bit for some market movement and for the stock to move into your range and some volume and liquidity to get back into the market before you close out of the trade.

But as always, if you have any questions or comments, please ask them in the comment section right below. And until next time, happy trading!

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