Closed 10 ARD June 55 calls at $2.65 profit of $424.10; Still holding 10 CRM June 70 calls Closed 15 NTES June 25 calls at $0.45 for loss of -69%, ($1537.50). For the bull call spread: Closed long 25 calls at $0.45 and short 30 calls covered at $0.10 for loss of -65%, and ($376.80). And that's my point there: the loss is nearly identical, but on a long call, the profit is unlimited, compared to a limited profit for the bull call spread. I still agree that over a longer period, the risk of the bull call spread will become much lower, but in the game of earnings, long calls and puts brings in the most profit for the risk. About 2 years ago, I had bought OVTI calls ahead of earnings, and got a great response from another option trader who did a bull put spread on OVTI ahead of earnings. He asked why I didn't hedge against a possible IV crush, and it came out that we saw OVTI through different eyes. He saw support in OVTI below that should not break, and I saw OVTI breaking resistance and pushing higher. Turns out, OVTI blew away numbers, and jumped 20-25% putting me into a 300-400% winner. He also made a nice 50-60% gain. And we were both happy with the trade. I guess my point is that it's up to the trader. If you have a safe mentality, then play it safe and hedge. My only hedge against such trades is risk management, where I use no more than 7% of total account weight. Overall, I have found that winners average 130% in gains while losers average 65% in gains always giving me a nice 2:1 risk ratio. As I say it, NTES gave me that -69% loss, right about average, and now I'll see if CRM can hold and push higher and give me that 100-150% gain. Overall net gain/loss is now at $672.10 since 5/14/08. ZUMZ and ARO report tonight, but retail stocks are highly unpredictable, and 1 good earning report can be misleading....so I'm off on new trades until next week, unless the Agricultural stocks start pushing higher again (such as AGU, MOS, CF, MON to name a few). Also like VIP and JOYG ahead of their earnings in the next 2 weeks. I'll update on CRM close once closed.
The June 70 calls gave me a better risk ratio than the June 65 calls. Example below will explain. Here's what can happen: For CRM June 65 calls: I would have bought near $3.40; if CRM drops to $56 (about 10% move), the options would be at $1.00 for -71%, and if CRM moved to $69, the options would be near $6.50 for 91% gain. At those numbers, I'm looking at a 1.28 risk ratio (91/71 = 1.28). With CRM June 70 calls: I bought at $1.70; had CRM moved to $56, the calls would be at $0.40 for -76% loss, and if CRM moved to $69, I'd be looking at $4.00 for a gain of 135%. My risk ratio here is 1.78:1 (135/76 = 1.78).
I think I understand why you are not understanding my point. You think a loss of $1,357.50 and a loss of $376.80 are IDENTICAL on the long call and on the bull call spread. I told you to not get enamoured with % in options due to the leverage but look at the actual P&L. I will let the last statement speak for itself and wish you luck as just keep doing what you are comfortable with.
Sorry about that misinformation....I only used 5 contracts on the bull call.....just multiply by 3 to get them on the same page. I was willing to risk my capital to trade them side by side, but I wasn't about to use the same weight. On the straight calls, I had already bought 15 contracts. But generally, what you would get is ($1357.50) for long call vs. ($1026.80) for bull call spread. I'd call it a $325 difference, or like the percentage says, about 4% in differences. I did close 10 CRM June 70 calls through all this debate though at $2.80 for gain of $1074.10. All positions closed and heading into the weekend early. gain/loss is now at $1746.20.
Okay, looks like we should have some great trades this week too, not many but still great....looking at SNDA calls or DAKT puts from my research for earning trades today.....will update if positions are opened.
Buying light here: SNDA June 35 calls have jumped from early morning of 50 contracts to over 1200 contracts by noon. I like the reversal on SNDA last Q, and momentum higher should continue here with a good chance on strong EPS/revenue report. Bought 8 SNDA June 35 calls here at $1.85. I also bought 10 DAKT June 15 puts at $0.65. These puts were cheap, but I went much lighter with only about 3-4% total weight, as compared to the SNDA position where I put more like 6-7% of total weight. Both will report after the market close (actually DAKT reports tomorrow morning). Will be back after earnings are reported.
SNDA looks like it will be taking a hit although it did report b-t-e. It was on my radar also, but it has been a minute since I traded earnings. I usually traded after the reports. How long have you traded this method?
to buy or sell that is the question, you may find this helps your thinking. No free lunches as they say.
Ouch, closed those DAKT nearly worthless for a loss of ($625.90). I will hold onto SNDA calls, as the earning report was great with top and bottom line beating estimates, I feel there might have been weak money leaving the table, so I'd like to see the shares back to $34-$35 area by Friday before I close out for a loss here. Bought 10 BIG June 30 calls at $1.10 and 10 JOYG June 80 calls at $2.50. Both report tomorrow morning. Good luck all, and hope you did better than me. With that loss, I'm back down to a gain of $1120.30 VictorS: I've been trading this since June 2006, but have started this strategy since 2001. It took me about 5 years to get all my research tools to run smoothly together.
Back in business.....JOYG and BIG both came out strong........and I hit it big. Sold those 10 JOYG June 80 calls off the bat at $4.10 for a nice gain this morning, but congrats to the guy selling above me. My gain here was $1574.10 As for BIG, I held onto to it as the open for BIG was slightly below par. I felt BIG would push to $31, and sold off as it did. I sold those 10 BIG June 30 calls at $2.15 for a gain of $1024.10 I also sold those poor SNDA calls at today at $0.25 for a loss of ($1305.90). My gain/loss has increased back to a safe level of $2412.60. For tonight, I actually bought some calls on OVTI (one of the very first earning options I took and it gave me big gains. Bought 10 OVTI June 15 calls at $1.85. this option is a pure value play with only about $0.15 in time value and IV at 42 (very close to norm). I also decided to take on a pure speculation play for OVTI. Bought 10 OVTI June 17.5 calls at $0.50 (total cost was $512.95). Pure speculation as I think OVTI should turn it up here with research showing more of an upside move compared to downside move. Will update tonight when OVTI reports good luck and happy hunting...catch that big one.