NYSE:BABA   ALIBABA GROUP HLDG LTD
The only earnings play on my radar for next week is BABA. Although there are others, I generally focus on those with good liquidity as evidenced by the bid/ask spread for the options I am looking for fills in (ideally, I'm looking for a <.05 spread, although I'm flexible with this, particularly with heavyweight underlyings like AMZN             , GOOG             , and the like).

In most cases, I take no directional bias with earnings. Announcements, after all, can go one way or the other and market reaction to the announcement can go one way or the other. How many times, after all, has an underlying's price declined in spite of an announcement's being "in line with expectations"? Many, because investors wanted to see a blowout surprise ... .

Consequently, my setups are mechanical and are usually short strangles with the short call and put strikes at the 1 SD             line or iron condors. Here are a couple of possible plays:

Aug 14 70/73/84/87 iron condor for a .81 credit
Aug 14 73/84 short strangle for 1.41 credit

With earnings being announced on 8/12 before market open, I generally look to put these on toward the end of the previous trading day (on 8/11) and also look to take them off at 50% max profit after volatility contracts post-earnings.

In the event price breaches a side of my setup, I look to exit the untested side for .05 or less or let it expire worthless; roll the tested side for duration and credit, improving the strikes if possible; and then set up a new oppositional position to the rolled side (e.g., if rolling the put wings to a later expiry and allowing the call side to expire worthless, set up a new call wing side in opposition to the rolled put wing side with an expiry the same as the rolled wings).

Notes: There may be some support for the notion that BABA is at lows here, and that any setup should be skewed bullishly. Were that to be my disposition, I would probably set up my short put strike around the 75 or 76 and skew my short call strike to around 85 or 86.
NaughtyPines
a year ago
Ended up doing a 68.5/85 Aug 21 Short Strangle right before the close yesterday (8/11), which I got filled for a 1.19 credit. I set it up to be closed at 50% max profit (.60 db), which was filled within a minute of the open ... .
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