Neutral double calendar Earnings 49P 56C mar23 mar29
https://www.tradingview.com/chart/OsBXckpZ/
Trying out this strategy for earnings tomorrow, when sets up with good IV spread the crush should profit what is typically considered a bought spread.
Direction is not an issue, only that the break-even points are outside of recent earnings moves. This setup goes as wide as possible without letting the belly of the profit/loss go below the trade expenses (commission and fees). This one usually moves so should settle in profit and the cost or max loss is minimal when closed before the short, front week expiration. The intention is to close as soon as the vol crush occurs unless movement is taking it more profitable at the moment.
The main analysis involved is checking the last several earnings moves so that all or most of them are within the break evens of the setup. So it is a sort of trend analysis looking at the trends/history of earnings moves.
This stocks options become reasonably liquid at earnings time so the fills in closing should not kill the trade. I have looked at several of these over the past few weeks and seems clear when good or bad trade. Now to place live trades and get the real learning (in the muscles) by doing. If these work out will post more with clearer entrance guidelines. Hard to find a better probability of profit or reward to risk ratio.
Sunday night parameters:
Stock price 52.27
debit of double calendar spread ~0.12 ($12 per contract) depending on fill
Theta $3.60
break-even points (conservative, actually small profit) ~ 47.50 and 58.50
max loss $12 plus expenses
projected (IV adjusted for post crush) belly of p/l return (zero price movement from earnings) ~ $4
max profit at the strikes of the legs: $43 at 49 strike and $53 at 56 strike
Trying out this strategy for earnings tomorrow, when sets up with good IV spread the crush should profit what is typically considered a bought spread.
Direction is not an issue, only that the break-even points are outside of recent earnings moves. This setup goes as wide as possible without letting the belly of the profit/loss go below the trade expenses (commission and fees). This one usually moves so should settle in profit and the cost or max loss is minimal when closed before the short, front week expiration. The intention is to close as soon as the vol crush occurs unless movement is taking it more profitable at the moment.
The main analysis involved is checking the last several earnings moves so that all or most of them are within the break evens of the setup. So it is a sort of trend analysis looking at the trends/history of earnings moves.
This stocks options become reasonably liquid at earnings time so the fills in closing should not kill the trade. I have looked at several of these over the past few weeks and seems clear when good or bad trade. Now to place live trades and get the real learning (in the muscles) by doing. If these work out will post more with clearer entrance guidelines. Hard to find a better probability of profit or reward to risk ratio.
Sunday night parameters:
Stock price 52.27
debit of double calendar spread ~0.12 ($12 per contract) depending on fill
Theta $3.60
break-even points (conservative, actually small profit) ~ 47.50 and 58.50
max loss $12 plus expenses
projected (IV adjusted for post crush) belly of p/l return (zero price movement from earnings) ~ $4
max profit at the strikes of the legs: $43 at 49 strike and $53 at 56 strike
Trade active:
Filled at .15 and on reflection used 50 Puts and 56 Calls. With the increase in IV overnight the break evens remain about the same but the Theta went up to $10.81! Now I go see our tax man and then to work. Tomorrow open we see what happens. :-)
Trade closed manually:
The shorts will expire out of the money and the longs may (but unlikely) return in the next week. Doing this proved to me this is a good idea as tracking the option values through the trade show it would have profited at least okay up to pretty well with a very low risk. In this particular case the price just blew through tha range suggested by the history. Was a good bet. Will definitely be doing this again.
Trade closed manually:
Adding this to try some things so get around quotes text being added when a symbol is used in ideas and updates. Citi: C (C) {C} . Now we will "see" what the behavior is when a symbol is enclosed in 1. nothing 2. Quotation marks 3. curly brackets and 4 brackets as I have just done above.
Trade closed manually:
Hmm. See straight brackets do not post same as in comments and no quotes on anything above. Just saw some on another's post from earlier today on JPM XBI XOP and others (JPM) XBI) (XOP)