SteadyOptions’ Comments Page 135
I have no problem with losses. Losses are part of the game. The question is the size of the loss. I followed you for a while and looks like you got really outstanding results. I think you are doing the right thing by going for the next month playing those trades with the front month is too risky because IV crash is too big and if the stock moves less than expected, the loss can be very substantial, 5060% in some cases. With next month, IV decrease is much less so the loss should be less as well. How much less? With those occasional losses, how much was the average loss? The way I see it you play for an event (earnings). Once the event is over, you should sell. For me, continuing holding at this point is a bit gambling. As you mentioned yourself, selling MA at the open was a smart decision. From my experience, this is usually the best thing to do. If you continue holding beyond one day, the results are unpredictable. The stock might reverse and you lose all the gains.
Nov 17 11:00 AMI like those trades to be short term trades. If I play 45 every week and don’t close them right away, there will be too many positions to manage. But it’s still a bit surprising that on 10% move, the trade is up just 1015%. I know that this is not a front month but still. But here is the dilemma:If you buy few days before and the stock moves (preearnings) it’s all good, you sell for profit and adjust the strikes. But what if the stock doesn’t move? Does it usually mean that the strangle can be purchased cheaper the last day before earnings? If the answer is yes, then the question is: is it better to buy few days before and give the stock the chance to move (preearnings) or better to wait for the last day to get the trade at better price?
Nov 16 04:02 PMKevin, thanks for the answer. I understand that the strikes are further than you expect the stock to move, but usually your strikes are symmetrical related to the stock price. In this case the put strikes were much closer to the price (at the time of the writing). You mentioned more bearish bias is this the reason?As for inflated prices I think that IV impacts mostly the front month. I’m buying front month (or weekly) options few days before earnings but don’t hold through earnings. If I have a decent profit (3050%) I sell. If not, I sell just before earnings. The idea is that IV increase on those stocks will usually offset the negative theta, so even if the stock doesn’t move, you should get a very small loss or a small gain. I don’t want to hold through earnings because options before earnings are usually overpriced and IV is elevated. What do you think? Have you tried it or you always held through earnings?