Quick Profit On WYNN Earnings Trade

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Earnings trade: This is the video update to cover the trades that we had on both Thursday and Friday of last week. Which would be the 15th and the 16th of last week. This is actually being recorded on the 18th. Since we only had one trade on Friday I kind of wrapped all these into one as kind of a weekend update.

The first thing I want to go over is actually our win earnings trade, WYNN. Originally back on Thursday ... and actually all these trades were for Thursday last week, just as a clarification ... Thursday last week, except for the only single trade that we made which was on Friday, closing out this win earnings trade.

Back on Thursday we had sold a strangle and win. We sold the eighty calls and the sixty-five puts, took in a dollar fifteen credit. Ended up closing out just the put side because this was the challenged side, this was the side that the market moved against. For a thirty-six dollar debit so seventy-nine dollar profit overall after everything said and done. 

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earnings trade

It was very typical of most of the earnings trades that we did. You can see implied volatility heading into the earnings event and win was very high. Again, we sold options out of the money on either end expecting the stock to move inside of this range that the markets had priced in. The stock did, the stock opened inside that range.

Actually, ended almost exactly par with the previous day and you can see that drop in implied volatility, that quickly allowed us to take money off the table. Very quick, very easy trade and win. Some of the closing trades that we had for the rest of the month, we went ahead and bought back our Apple's inverted strangle.

After all adjustments we took in a one-sixty nine dollar loss on this one. This one didn't really move against us but I think it was definitely the case of a little bit of over adjusting heading into the market decline. As Apple was heading down lower, and particularly on the biggest low day it had, I think we over adjusted this position just a little bit.

We left ourselves with a range of about a hundred and ten to a hundred on Apple stock. This is ideally where we made money. You can see the stock just kind of floated and sit above that range for the rest of the entire month.

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We got that drop in implied volatility that we wanted to see but we just barely missed the actual range that we were expecting. Had the stock closed in another dollar, just down just even one more dollar and we would have shaved off another hundred bucks from this potential loss. At the end of the day, it didn't hurt us overall in the month of October but didn't help either.

The other trade that we closed out of is just our one call side vertical spread in Amazon. This was our original call credit spread that we had on Amazon. If you remember when Amazon had dropped just a couple days ago, we went in, and we added the put side as a hedge.

So just a couple days ago when Amazon dropped back here, we went in, sold the put spread below the market just as a hedge in case we got this type of move heading into expiration, which is exactly what we saw on Amazon. That big rally is heading into the actual expiration period.

That hedge that we added on the put side ended up saving this trade. Although we still ended up closing the Amazon trade for a loss of about a hundred ninety-eight dollars, it could have been a four hundred dollar loser for sure. Again, here we didn't get the move that we wanted to see in the stock, the stock moved against us.

And implied volatility, for the most part, has traded virtually sideways, a little bit of a dip in September, but the stock has just continued to move one directional during that period. Even though we didn't get the move in the direction, we didn't get the move in volatility, the fact that we ended up hedging the stock and protecting it from a four hundred dollar loser. I think at the end of the day was a pretty big win.

Netflix ended up being a real nice trade. This is a really funny trade. I'm going to go over this trade in a little bit more detail tonight on the strategy call with the lead members. At the end of the day, we ended up buying back all the different legs that we needed to in Netflix, keeping the one long call option to expire worthlessly.

It wasn't worth anything, we held it as a lottery ticket. We ended up buying back out of our original iron condor. Again, you can go back in the video archives and see what we did to enter that trade. With our original iron condor on Netflix we had sold the one twenty-five, one thirty call spread, so we just left on the one-thirty calls, bought back the one twenty-five calls that we were short for three dollars.

That's just to get the risk off because we don't want to be holding those short options. The side of the market that Netflix moved against was our put side. We bought back the entire put spread; the ninety-five, ninety put spread for a twenty-nine dollar debit. At the end of the day, we took in a hundred and forty-five dollars of overall profit in the Netflix trade.

Netflix, again, moved a little bit after earnings on Thursday, so definitely moved down lower. Everyone was expecting the stock to go higher, but more so than the move down was that drop in implied volatility that we saw on Thursday and Friday.

That's really what helped solidify this trade as a winner because we got that quick very dramatic drop in implied volatility as we always expect with stocks, especially like Netflix. That helped us solidify this profit. That's how you are supposed to trade these earning trades, is make the mark and make the move that it's not likely to make.

Kind of force the market into that type of situation. As always, hope you guys enjoy these videos. If you have any comments or questions, please ask 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.