APOL is trading $49.93, down small with IV30⢠down 1.6%. The <a href="http://www.livevol.com/">LIVEVOL⢠Pro Summary</a> is <a href="http://livevol.blogspot.com/2010/10/apol.html">in the article</a>. <img src="http://www.livevolpro.com/help/images/blog/apol_summary.gif" /> ------------------------------------------------------------------- <a href="http://www.livevolpro.com/help/free_trial.html"><img src="http://www.livevolpro.com/help/images/blog/lvp_trial_ad.gif" height="200" /></a> For a limited time we are offering a FREE real-time trial to Livevol Pro⢠for non-professional traders. You can get your trial by following the directions here: <b><a href="http://www.livevolpro.com/help/free_trial.html">Click for Free Trial Offer</a></b> ------------------------------------------------------------------- APOL has earnings today, AMC. I have included the earnings stats for the last 8 cycles for APOL (<a href="http://livevol.blogspot.com/2010/10/apol.html">in the article</a>). <b>What We're Lookin' At:</b> The result of a simple trade: Sell the ATM straddle the day before earnings, and buy it back the day after. We can see that the straddles are pretty fairly priced as a sale was a winner 4/8 times and a purchase was a winner the other 4/8 times. The average is for the sale to win a 4% gain, which is pretty small given the risk of a short earnings straddle. Also look at the "ATM Straddle IV" column. The average ATM vol the day before has been 74.63%, with a low of 50.58%. More on that in a sec. Let's look to the Options Tab (<a href="http://livevol.blogspot.com/2010/10/apol.html">in the article</a>). <img src="http://www.livevolpro.com/help/images/blog/apol_options.gif" width="600" /> We can see the ATM straddle is trading at ~ 118 vol, with mid-market ~ $3.65. Keep in mind, the 118 vol isn't really a fair comparison to the other vols b/c expo is only three days away. That means the vol is almost entirely earnings related with no "dilution" of "normal" trading days. For a better explanation of this phenomenon, you can read the article I write for Bernie Schaeffer's mag, "Sentiment" here:<b><a href="http://www.schaeffersresearch.com/sentiment/pdfs/sentiment_2010_Summer.pdf">Sentiment Magazine</a></b>. Page 25-26, and check out the section "Scheduled Volatility Events." So, now what?... <b>Possible Trades to Analyze </b> 1. Sell the ATM straddle @ $3.65 and hold on for dear life. Very risky... This is a pure short gamma trade. 2. Make a delta bet and a vol bet. The for-profit education companies have been on an upswing of late. Sell the 50 puts @ $1.85, leave just one sided risk. 3. Sell the 49/50 put spread @ $0.50 or better (not easy to get those prices). Then you have a 1:1 MaxLoss:MaxGain ratio, and you get to take a stand on the earnings vol. Keep in mind, you could buy the spread and make the opposite bet. I like the sale of put spreads the best. I am tantalized by the Oct 48/50 1 x 2 put spread - buy 1 Oct 50 put, sell 2 Oct 48 puts @ ~$0.15 net credit. Note the naked downside though below $46. These are all very risky. This would be a pure speculation play, not an "investment." This is trade analysis, not a recommendation. <b>Follow Live Trades and Order Flow on Twitter: @Livevol_Pro</b> Details, trades, prices, vols, skews, charts here: <a href="http://livevol.blogspot.com/2010/10/mtb.html">http://livevol.blogspot.com/2010/10/mtb.html</a> Legal Stuff: <a href="http://www.livevolpro.com/help/disclaimer_legal.html">http://www.livevolpro.com/help/disclaimer_legal.html</a>
It doesn't look like those choices did very good . Of course, you can't win them all. Also, you wrote an article for Bernie Schaeffer!? Seriously, I thought his book was OK and he has some good ideas but when I got offered a super cheap subscription to his basic service (it was something like $50 for a year and a half, so I said what the heck), I tracked many of the trades and they didn't seem to be much better then flipping a coin. JJacksET4
I'll defer to your experience with Bernie Schaeffer. I just wrote an article on volatility at a sort of beginner/intermediate level. Thanks for your feedback.