Equity option trading

Discussion in 'Journals' started by optiontrader, May 14, 2008.

  1. Pure option trading, no stocks, no futures, just love options...

    $20,000 starting account, I'd show the account like the p/l trader journal, but I suck in the actual cut, paste, and editing to keep my account number and all from showing up...

    Today, SINA is reporting earnings, so I bought 10 SINA May 55 calls at $1.50 at 2PM EST. I feel SINA could push on earnings just as SOHU did. Will update tomorrow.
  2. Looking forward to your journal. Do you mainly play directional stratagies or are you trading purely volatility most of the time?

    Good Trading
  3. I just sold those 10 SINA May 55 calls at $3.10, for profit of $1,574.10 (I'm using Optionsxpress with their $12.95/comm rate).

    Account is now at: $21,574.10 +$1574.10

    Earnings is a purely volatile game, but I do invest about 50% of my capital on directional plays too. In fact, I'm looking to add OTEX Aug. 35 calls at current price between $4.50-$5.00. Will update once bought.
  4. New buy for 5/15:

    10 ADSK May 40 calls at $1.50.

    My research says ADSK has another 2-3 points to the upside that might be captured on earnings tonight...we have yet to see.
  5. 50_Bip


    Options are only pricing in a 5% move, so you may get middled on the vol crush here with only one day remaining until expiration. Oh well, easy come easy go. .

  6. And that's a big reason my research isn't solely based on options pricing. In fact with IV on my options at 95 right now, I think they are pricing a much bigger move than 5%. But think about it? a 5% move with a price at $40.50 would push the price to $42.52. At that price tomorrow morning, my options would be price at $2.50, and I'll take that $1 (+66%) gain anyday. Wouldn't we all?

    I research only puts 1/3 weight on option prices (especially the IV of the actual option strike I'm buying). 1/3 is technical, and 1/3 is fundamental....We've got an hour left as ADSK will present guidance for Q3 and that's what will move the share. We already know Q2 from its recent earnings update call in late April and early May.

    Good luck all.
  7. Didn't update their guidance, and ADSK is playing it safe, not quite the way investors hoped.

    Closed 10 ADSK May 40 calls at $1.10 at the market open. Loss is ($425.90)

    Account: $21,248.20 +$1248.20
  8. 50_Bip


    At least you were able to sell for $1.10. ADSK is not a good stock for earnings strategies; albeit, the only time it was good for an earnings trade was in Feb 2008. Have you ever checked out OptionSlam?

  9. Never heard of optionslam.com I will check it out.
    As for ADSK, it goes in and out of great earning play. I played it this time because to me it was a fairly low vol. play. I didn't need ADSK to hit 10% gain to make a good chunk. I just needed ADSK to make 5-6% move for a good trade. Plus, the downside risk was low, because ADSK already negated downside risk when they pre-reported earnings 2-3 weeks ago. So overall, I felt it was a low risk play, where I'd lose no more than 50% of cost, and potential to gain 100-200%.

    I've traded and tracked ADSK for earnings play since early 2006. Here are a few others: ILMN, IBM (great play for past 3-4 quarters, but getting ahead of themselves now), PCLN (awesome earning trades ever since late 2006, especially when it was back in the $30-$40 price level), CMG used to be an awesome mover too until recent 2 quarters, the list goes on, but that's just a few....

    If you throw a few stocks out there, I have probably traded options on those stocks before (that is if they have option trading). My latest dud was RIG, I had some nice moves late last year and even the first quarter this year where RIG opens near previous close, and then rocks higher for 5-10 points through out the day. RIG reported last week, but this time it didn't move much, so I'm moving out of that for a while. Anyhow, have a great weekend.
  10. Buy 7 EXM June 60 calls at $3.20 for ($2252.95)

    EXM reports monday morning and have ya'll noticed, EXM short interest increased from 250K back in Aug. 2008 to current level of 3.3M, while the stock ended August 2008 around $40 and is now at $55. Looking for 8-11% move to $59-$61, but in the extreme I'd like to see 15% move to $63.

    IV is 74, so quite high, but low enough for me to take on this risk. at 74 a 10% move will create 75% gain in option position.
    #10     May 16, 2008