BUY +10 STRANGLE ANF 100 (Weeklys) AUG5 14 50/39.5 CALL/PUT @.03 LMT
...the net gain from Wednesday's established position
SELL -10 STRANGLE ANF 100 (Weeklys) AUG5 14 50/39.5 CALL/PUT @.45 LMT
...would be about .42 a contract or $420.
This trade worked out mostly because the implied volatility collapsed and the stock moved in the direction Chaikin Analytics predicted. That's the idea. Sell overpriced junk to hedgers and speculators with a high probability of success and profit. Chaikin Analytics boosts the trading edge further by providing consolidated insight about the company's fundamental and technical standing prior to earnings. Based on a year's worth of earnings trades, the model gets it right about about 80% of the time. Put the two together (Chaikin and the High Probability Option Selling Concept), and the expectancy is truly incredible. There are certainly risks related to naked option trading, but the strategies can be deployed with risk defined options. The win rate and profit are slightly reduced in favor of peace of mind and no nervous stomach.
Though we'll bear the risk of some calamitous market event and hold our trade open to let it expire worthless at the close tomorrow, our probabilities are 99+ percent that we'll take in another $425+ in profits to add to our Chaikin Analytics powered speculative earnings cash stack from this season. I officially paid for my Thanksgiving cruise with this final admittedly risky, but winning strategy. This was my play money at risk, not money I need for bills or retirement.
Two more speculative earnings trade opportunities I'm going to look at in next couple of weeks
- Up-Channeling $JOY brings its neutral Power Gauge to the earnings plate on 09/03
- Bearish retailer $LULU on 09/11. That one had a violent price reaction last cycle, so implied volatility is likely to be in the hundreds before that announcement.
My trading partner, AA, has profited from risk defined speculative earnings trades as well, though he's had difficulty buying back his multi-leg positions when he made a trade too close to expiration. Hopefully, he'll recap his summer earnings experience battling market makers here on the Power User blog.
Commissions and bid-ask spreads of multi leg option trades are another reason I prefer to trade naked, but not everyone has the account size, buying power or the experience to run with this strategy. Which is why we manage so many different stock and options portfolios to demonstrate Chaikin Analytics true power.