Okay! Gotcha! Will probably try to paper trade that on indexes. I´m fairly good with calling moves once a week or so. While you are doing the earnings moves, I could simply play a move for volatility in a debit spread and hold longer than I usually do. Few more days. Might work? Though with a low VIX the indexes are not moving much of anything and they creep a little day by day, but do not really move a lot very fast in a bull run like this with VIX at around 17. The move needed to make money in a debit spread is normally quite big. What exactly I do not know, but will have to study it some more. thankyou very much for the insight to debit spread trading Ryan. Do appreciate it.
Waiting for a friend to visit and not likely to trade today. Tropical day here in the Caribbean. Anyway, one more question. If you leg out. You will sell your high side and be left with the sold side. Doesn´t that change the margin requirements on your account? Could leave you with something else here, if you had a lot of contracts on a small account.
if by high side you are referring to the higher strike price, then no. Because you will only be left with the lower strike calls, aka long those calls. If you legged out of the bottom and left your short calls in play and had to small of an account there is a likely chance your broker will not let you do the trade. It all depends on what you are or aren't restricted too.
ryan, what research are you using that shows you a 100% of something happening within a certain time frame. I do believe that is not possible, 100% certainty, in the market.
It doesn't work that way. You're only getting the 4.00 at expiration. You're treating these as binaries, when in fact the call spread is trading at 3.00 with over a week to go. If it's a foregone conclusion then you're leaving another 33% on the table by not buying the vertical here at 3.00 with your remaining free cash. I'd bet your net liq that you don't hold the AKAM call spread to expiration, so wtf are you assuming 4.00 on the offset? That's nuts. The fact is that you got a double on your vertical, so the 1.45/4.00 R/R is GIGO. You did no better with the vert than you would've done with the long call, but yeah, I still prefer the vertical. 100% certainty? Needs high vol? 4.00? huh? You're gambling well and I hope you parlay it into some cash. Please stop with the math as it's nuts. You're obviously doing just fine on discretion and it's best to keep it that way. FWIW, I am short WFM from 80.61. Just another opinion that it's time to get out.
Yeah, its true I can't claim 100%, maybe somewhere in the 99% range then.....I have notes on the last few AKAM reports and post earning price action. In at least the past 4 reports my notes told me AKAM went at least above 15% sometime the day after earnings, and again there's no direction here, I checked and it was actually 3 drops of 15% before November's +15% move. So with that note, I can say with 100% confidence (at least my confidence that we see at least 15% again). This one today could be the change in the recent 15% swings. So far today, we only have 13.64% (just counting the trade from 9:30AM-4PM).
I got it your point. You think I was treating this is binary options where the options would expire right away and I receive the full expected premium. That's where you're going. I see, good point. I wasn't going there though. Why didn't I put a 34/39 call spread instead if I felt 15% to $39 was very likely? I used a lower spread to give me the wiggle room to make it possible to get a target of $4.00 on the spread. First of all, most price action earnings play will give you the jerk move (on upswing in price, the shares will jerk lower at the open before making an attempt at highs of the day). I played 34/38 spread to lower initial risk, because sure the long calls are great if we all knew AKAM will keep on going, but that's not the case. When the shares open, I expect a jerk move to leg out of 38, then on the rebound take out 34 longs at the higher price. Same way I did it with NFLX just weeks ago, same way I did it with MA. Of course, for a first timer, it's hard to see the difference between the risk of a long call and a spread, given the parameters of the trade, which includes AKAM options at high IV, and data showing confidence that AKAM at $38 (on positive earning report) is close to 100%. Any of those parameter change, and the whole play is out the window. Were AKAM's options expensive? For pre-earnings, it I consider options expensive if the stock moves 10% and your options do not show 100% return in intrinsic value. So with AKAM at $34 and 10% move putting it at $37.40, the AKAM feb 34 calls would have to be below $1.70 for me to consider options at Fair value or lower. Sure, all this is not conventional, but test them out, it's working. If it only worked for 1-2 trades, then those trades should be considered outliers only, but I've put in 6 spreads over the past 8 weeks or so, and it has worked to my advantage over just long calls. It gave me a better percentage gain per trade if both, the long option on its on and the long position from the spread, were closed out at the same time. As for WFM, I still hold the calls....I made $300 on the 77.5 calls when I switched from 77.5 to 80 calls yesterday. And with $700 risk on the 80 calls, my net risk is only about $400, by which gains in AKAM has more than covered the risk. I consider WFM a free trade here. You might make money on WFM beyond next week's expiration, but I think we see WFM at least above $78 for quite sometime before a big reversal. If you were going to play a short, why not short one that has been week during this rally? OPEN comes to mind.
I expect total loss on a -15% drop. But that's where earnings research comes in. I already the cloud sector (and nearly anything related to that area) has been strong with solid numbers from the likes of FFIV and VMW. And AKAM with its internet security play fits right into part of this segment. Plus, I had taken the ride on AKAM from $48 to $24, so I knew the reversal back in September and October was good when shares held at $20 even though bears tried to push it lower. Earnings gap up in November confirmed, and I've been looking forward to today's profit since November. Just like how I'm looking into CSTR's call trade with profits sometime in May. CSTR's earning report just surprised analysts this week. I bet analysts are still behind on current quarter's results, and another surprise will follow through, of course as long as price action can give me a good entry point. Couldn't you see AKAM's nice little tight trade from $32-$34 almost as if it was setting the short sellers (bears) up for some slaughtering.
As for WFM, before that crazy rally to end yesterday, I was looking for WFM to push from $76 to $81 for a solid 5 point play. But we got this wild move towards end of day yesterday pushing it from $76 up to $78 (clearly someone big had inside info). For that reason, I closed out 77.5 for nice gain $300 pop in about an hour, and switched to 80 calls. Personally, I don't see any resistance for WFM here above $80 unless you do? The only downside risk I see is if the market fails here and my data suggest that is not the case JUST YET.