Following up on yesterday's post, Marc Chaikin' stock pick from his weekly Insights newsletter is up over 4 percent in midday trading today after positive earnings news. Had you simply entered long before the close yesterday or traded a more complex multi leg option strategy designed to profit from both a directional move and a collapse of implied volatility, your wallet is a little fatter today. I sold an out of the money naked put. Here is my round trip trade record.
One More Earnings Trade This Week
Neutral rated Autodesk has negative potential and is in a weak industry group. Valuations (price to sales, price to book) make the bar for significantly further price appreciation high. I'm taking advantage of high implied volatility and selling a naked $60 call option into earnings. The options market is pricing a $3.50 move after the earnings announcement, so with expiration tomorrow, I feel ok about the risk of of selling uncovered option. Even a 2 standard deviation move is well below by per-trade risk tolerance. I'll report back tomorrow. Here is the trade I took: SOLD -6 ADSK 100 AUG 14 60 CALL @.50 AMEX
- On Tuesday 08/12, I sold 20 put contracts for $32 each: SOLD -20 NTAP 100 AUG 14 37.5 PUT @.32
- Today I bought back the sold puts for $3 per contract: BOT +20 NTAP 100 AUG 14 37.5 PUT @.03
- Net Profit $29 per contract - $580*
One More Earnings Trade This Week
Neutral rated Autodesk has negative potential and is in a weak industry group. Valuations (price to sales, price to book) make the bar for significantly further price appreciation high. I'm taking advantage of high implied volatility and selling a naked $60 call option into earnings. The options market is pricing a $3.50 move after the earnings announcement, so with expiration tomorrow, I feel ok about the risk of of selling uncovered option. Even a 2 standard deviation move is well below by per-trade risk tolerance. I'll report back tomorrow. Here is the trade I took: SOLD -6 ADSK 100 AUG 14 60 CALL @.50 AMEX
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