I've used LazyBear's COG Channel for several strangle trades this past two weeks with exceptional returns. A strangle option is simply buying puts and calls with the same expiration. You purchase a strangle when you don't know direction and want to play the rise of volatility (vega, IV) for each direction.
Chart Indicator
COG Channel Squeeze is simply when you see a number of the blue crosses lining up.
I was able to make more than a 6,000% return on my put options, because the squeeze was leading up to earnings date.
More Examples Below. *Check out YUM for a possible play a week or two before 2nd Quarter earnings July 16, 2014.
being a primary volatility trader, I'm more focused than ever hunting for volatility. Here is an example of a stock that could multiple quickly by years end and into early next year. BIOD Biodel Inc. BioTech company
guidoisot
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thank you JR (... by teh way , .. . is this nickname you have adopted, perhaps somehow related to the famous JR of the Texan oil family of the famous TV series of quite a few years ago?)
anyway, right now there is FDX which is almost double topping with a clear negative divergence compared to the TRIX indicator.
I have the (only gambling, unfortunately) impression that FDX could be a good candidate for a retracement in the next days after earning releases in the coming hours.
Is this a play you would consider interesting? and if so how would you play it with deep OTM put options? or do you think it could work out better with an OTM put bearish calendar spread?
Thank you very much, Best, bye.
QuantitativeExhaustion
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If I see another COG Channel squeeze set up with YUM before earnings, I'll take +/- $10 Strangle position.
HamedAghajani
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Hi. How do you trade this? The chart is hard to understand and read. thanks, Hamed
QuantitativeExhaustion
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It's not hard at all. First you need to be able to hedge with options using puts and calls. If you don't have this contact your broker and fill out the forms in order to trade puts and calls. I would suggest e-options or option house if you do not have an option account set up already.
As far as the researching expected events it's really easy. Look up future earnings dates. You can use TradingView to look up to next 7 days. You can also use Yahoo Earnings Calendar for any future current quarterly earnings.
As far as the chart... really simple Hamed. COG Channel Squeeze is what you would look at. IF you see blue crosses you have a high degree of expected future volatility in the near term. IF your referring with the chart just above, that's a bit more complex. I would keep it simple for now and look for COG Channel Squeeze.
QuantitativeExhaustion
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Here is another example of a strangle option strategy using a COG Channel Squeeze. Net Return on Investment 331%
QuantitativeExhaustion
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Not over yet either. Expecting Price to Keep Dropping!
guidoisot
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Hi,
interesting idea! So far I have been hearing only about selling pre-earnings volatility … not buying it. However, would you please share some more info on this technique you apply?
Before earnings, you buy puts and calls deep OTM, expecting to profit from big changes in prices after earning releases. But I understand that before earnings volatility increases, whereas just after earning releases it drops dramatically. How do you avoid buying just short term volatility? I would think market makers do know well how to price it to their advantage, so how long before earnings (few weeks? several months?) do you purchase these deep OTM options?
How far OTM are the strikes you select? what delta do you choose? or what other criteria do you use to determine their optimal strikes?
Do you select only those stocks which historically demonstrated higher than avg price swings just after earnings? or those stocks with highest earnings surprise rates? how and where do you search for these candidate stocks?
Any numerical example you can post here among the 6000% trades you mention?
Thanks. Best. GT
being a primary volatility trader, I'm more focused than ever hunting for volatility. Here is an example of a stock that could multiple quickly by years end and into early next year. BIOD Biodel Inc. BioTech company