I just bought GRPN straddle for 1.75. I will sell my straddle prior to earnings on Monday. I also bought JCP butterfly yesterday. Made some money there. However, I sold my straddle too early yesterday. If I waited till 3:30 or so, I would have made some money. I bought the fly once I sold the straddle.
Very good. I bought GRPN 6/7 strangle on Thursday for 1.10 and sold on Friday for 1.25. Different entries, different times, similar results.
I bought the NTES SEP 50/57.5/65 butterfly yesterday for 2.85. I wonder if I paid too much here. But in any event, NTES dropped big. Showing some loss here. Bought CSCO straddle for pre-earnings run-up. Had to sell for a loss. Could have timed it better.
i would think that csco would be a good butterfly canidate for earnings... they end up having mild moves at earnings.. i just would profile the stocks that are expected to really move at earnings and do the impilied vol ballon pre earnings trade on them... are you looking at any of these trades historically before you do them. . or are you just taking wild guesses...
Yes, I do look at them historically, but seems to me like it doesn't matter. A good example would be the PCLN straddle pre-earnings, which was trading at a discount compared to historical norm. Instead of the straddle running up prior to earnings, it went down. What we should discuss is whether we should look at implied volatility levels. What we need to determine is whether the run-up in volatility will be higher than the theta decay. Any way to determine that? Implied vol goes up before earnings. What is hard to gauge is how much theta decay will hurt your profit. Now, the straddle strategy works. I just want a better success rate.
I think the cisco butterfly would have been a loser if you held till afternoon if you bought the atm fly..i.e. middle strike at 17. I specifically remember csco straddle trading in the 1.40s. The jump is higher than straddle price .
I think the key here is to minimize losses. Generally, trading about-to-expire options produce more losers than winners if the expiration day is close to the report day (Eg CSCO). In most cases this risk can be reduced by mixing monthly and weekly options. It works best when monthly options have more than 30 days till expiration. However, in the case of OpEx week there are no monthly options to speak of (they all expire in a week) and that may produce big losses. Another useful rule is to take winners earlier. In many cases a position may show a 5% profit on the same day it was initiated but that profit may evaporate quickly the next day and never come back.
you know the "implied vol balloon" trade is spurious. It doesn't really work - everyone thinks it does but market makers are smarter than that. The vol going up is really you mismarking your theta.