Hi Fellow Traders and Investors,
The more I trade options up to earnings, the more I’m loving it! Let me tell you why.
As we discussed in other posts and videos, earnings announcements can be very unpredictable on the movement of the stock. Just because a company beats estimated earnings, doesn’t mean the stock will go up and the same is true if a company falls short of earnings, the stock price could still move up. The unpredictability most often leads to high volatility. Generally, in high volatility, we want to sell options. But in the case of calls, over earnings, I am buying. Yes, this is conflicting to what I just explained, so why am I buying?
First, there is MAXIMUM LOSS DEFINED. I’m buying call options because I’m beating that the stock will move up prior to earnings. If I’m wrong, my loss is defined by the amount I paid for the call. I will not lose more than the premium I paid.
Secondly, there is UNLIMITED PROFIT POTENTIAL. If I’m right and the stock makes a large move up in price, I could make
50 - 100% or even more in profit!
Let’s look at the earnings trades I made on INTU.
After an analysis, I decided to go long (buy) calls on INTU. On February 13, I bought the 16 March $170 Call for $2.00. At the open on February 15, the underlying (stock) was up $5.37 from the close on February 13. Therefore, I decided I would close my $170 strike on February 15, at $4.02, for a profit of 101%.
All indicators lead me to believe INTU wanted to move higher, so I bought more calls. This time I bought 16 March $180 Calls for $1.20. My initial target is to close trades at 100% profit. When my initial target was achieved, I closed half of my positions, just one day later on February 16 (Friday) at $2.41. This was also an ROI of 101%. I decided to wait to close the other half
of my position until the next week. Monday was Presidents Day and the market was closed. I knew I wanted to close the position today, on February 20, because earnings announcement was after market close. I closed the remaining positions
on February 20, at $2.75 for an ROI of 129%.
Now you understand the importance of setting targets and taking profits when your targets are achieved.
We hope that you are finding this information on our trades helpful to you. These blog posts should especially be helpful
to those of you who are newbies (new to trading) since there is so much to learn especially on trading options.
If you have questions, feel free to leave a comment below or e-mail at us at [email protected].
Happy Returns!
Trader Cindy
The more I trade options up to earnings, the more I’m loving it! Let me tell you why.
As we discussed in other posts and videos, earnings announcements can be very unpredictable on the movement of the stock. Just because a company beats estimated earnings, doesn’t mean the stock will go up and the same is true if a company falls short of earnings, the stock price could still move up. The unpredictability most often leads to high volatility. Generally, in high volatility, we want to sell options. But in the case of calls, over earnings, I am buying. Yes, this is conflicting to what I just explained, so why am I buying?
First, there is MAXIMUM LOSS DEFINED. I’m buying call options because I’m beating that the stock will move up prior to earnings. If I’m wrong, my loss is defined by the amount I paid for the call. I will not lose more than the premium I paid.
Secondly, there is UNLIMITED PROFIT POTENTIAL. If I’m right and the stock makes a large move up in price, I could make
50 - 100% or even more in profit!
Let’s look at the earnings trades I made on INTU.
After an analysis, I decided to go long (buy) calls on INTU. On February 13, I bought the 16 March $170 Call for $2.00. At the open on February 15, the underlying (stock) was up $5.37 from the close on February 13. Therefore, I decided I would close my $170 strike on February 15, at $4.02, for a profit of 101%.
All indicators lead me to believe INTU wanted to move higher, so I bought more calls. This time I bought 16 March $180 Calls for $1.20. My initial target is to close trades at 100% profit. When my initial target was achieved, I closed half of my positions, just one day later on February 16 (Friday) at $2.41. This was also an ROI of 101%. I decided to wait to close the other half
of my position until the next week. Monday was Presidents Day and the market was closed. I knew I wanted to close the position today, on February 20, because earnings announcement was after market close. I closed the remaining positions
on February 20, at $2.75 for an ROI of 129%.
Now you understand the importance of setting targets and taking profits when your targets are achieved.
We hope that you are finding this information on our trades helpful to you. These blog posts should especially be helpful
to those of you who are newbies (new to trading) since there is so much to learn especially on trading options.
If you have questions, feel free to leave a comment below or e-mail at us at [email protected].
Happy Returns!
Trader Cindy
RSS Feed