cheap option earning play?

Discussion in 'Options' started by zxcv1fu, Jul 12, 2007.

  1. zxcv1fu


    There are many big stocks will have earning reports in the next 2 weeks. Anyone is buying cheap short term options of AAPL, INTC, GOOG, YHOO, PFE? even SMH?
  2. rickf


    Earnings can go either way......even on companies you THINK you are pretty bullish/bearish on. If you were daring, you could do very DOTM spreads for a smaller profit but a higher probability of the spread expiring worthless next Friday. (That's worked for me in the past)

    You could do a straddle/strangle, but if it was me, I'd stick with the DOTM spread.

    Just one thought, anyway. I'm sure there will be others....but I wouldn't say "cheap" is what you're looking for per se, but rather "appropriate risk/reward potential". After all, you could buy a CHEAP .15 option on GOOG and still lose money. :)
  3. I believe the last few GOOG earnings the Straddle sale has been the play. Dont get me wrong I am not suggestion you go out and sell the straddle. If memory serves me correctly the at the money Straddle in GOOG has been around 21 to 23 bucks the day of earnings and had you sold it you’d have been easily been able to cover it the next day for a big winner. In fact one time I think the straddle expired at about 35 cents one of the recent earnings in GOOG. I might be wrong I’ll double check tonight if I have the time. When I traded individuals I tended to be a seller of the juice going into earnings, I just prefer to be a short gamma player in these things but take my word for it there are times its gets ugly.

    Good luck

  4. The last few GOOG reports have been a wash for the atm straddle sale. Sure, one strike is bound to go OTB at pennies, but it's not been the atm in recent months.

    I agree that playing the straddle is probably the right play, provided it's played small; with the assumption that you may be covering at 2x the credit received.
  5. i think writing GOOG straddles into earnings is way too much risk for 99.9% of the options trading community.

    pure insanity for MOST traders.
  6. Willy I agree ....
  7. zxcv1fu


    It is way too risky. I'd buy cheap Jul calls, little money with potential huge gain.

    I bought SMH 40 jul calls @0.23 last week, today they r more than 200% in profit. Guess moving from OTM to ATM is the key. Hopefully it will move up more since INTC's earning is next week.

    One of the web site do the cheap earning plays:

    I have not decoded/subscribed to it but think they do the option buyings tomorrow.
  8. as of today , I don't see ANY trade on GOOG into report. July atm straddle's premium is about 4% , which is in line with last three qtr's results. Also July/Aug skew is priced edge what so ever for both long and short calendars. Simply a coin flip trade , imo.
    Maybe conditions will change in the next week.
  9. zxcv1fu


    I assume all options r priced perfectly according what I have learned from option floor traders since market is so efficient.

    I am just think of the last week the OTM options will be cheap, if GOOG moves big like RIMM from the earning then the options will worth lots of money.
  10. ALL ? I don't think so
    #10     Jul 13, 2007