Thinking about using 1k to buy some options spreads for earnings season. Anyone else paying earnings or have had success/failure playing earnings?
>>1207992
companies im looking to buy some spreads on are
AAPL
AMZN
TSLA
DIS
CMG
any suggestions? i missed out on playing netflix and googles earings. couldve made some nice sheckles
>>1207992
anyone else playing earnings? buying stocks or options?
>>1208021
short tesla
>>1208098
seems about right
elons brother sold 12k shares monday so ill probably by two in the money puts and one in the money call
>>1208123
why buy a put and a call? isnt that counter productive?
>>1208126
>this is the average poster on /biz/
>>1208131
how am i wrong?
>>1208126
>tfw not approved for naked call/put writing
also just to reduce risk in case tsla jumps
>>1208126
google option spreads
>>1208148
forgot pic
>>1208148
wouldnt it be smarter just to buy one put instead of two puts and a call?
>>1208170
ok. what would happen if i shorted a stock in one broker and held it long in another? if I did this before say an fda approval or an earnings report I would be gauranteed to catch the spike/fall. Couldnt I just setup a stoploss for each and be gauranteed profit?
>>1208180
how do you not understand that this makes you 0 money. b/c one went up and the other went down.
>>1208180
but with options you deal with time decay so the depending on if you buy out of the money or in the money calls/puts and how soon the underlying stock hits or goes past the strike price
>>1208180
i can also set a stop loss on the options contracts
>>1208195
not if it hits my stop loss
>>1208207
You think that's going to save you on earnings?
>>1208217
I dont understand?
>>1208221
>>1208217
I dint think you guys understand. lets say I buy a hundred shares and then short 100 shares. I set a 2$ stop loss on each. when earnings comes it doesnt matter if it goes up or down. ill lose 2% in one account and if the change is 15% ill gain 13% in the other.
What am i missing here?
>>1208227
this is why i trade options. risk/reward is very high but buying spreads reduces risk. options is another ball game
>>1208227
can someone show me how this is wrong?
>>1208244
>>1208251
im not talkin everyday volatility here. im talking binary events like fda approval. it will either shoot up or drop a lot.
>>1208255
binary events like this are gauranteed catalysts for significant price change.Seems like an easy way to grow an account
>>1208227
You are missing the fact that options cost money and that the underlying may not move enough to cover what you spent on the initial purchase.
Also why would you do it with two brokers? That's just dumb, use the same broker.
Finally I think this might help everyone in the thread get past Options Trading 101:
http://www.investopedia.com/slide-show/options-strategies/
>>1208270
nigger im not talking about options
>>1208287
the thread was meant to be for options then you started questioning options strategies using long and short examples with stocks not options
>>1208296
>Anyone else paying earnings or have had success/failure playing earnings?
Im sorry I didnt know this was an options only thread
>>1208299
you were using examples irrelevant that were irrelevant to what was first being discussed
>>1208304
i was asking a question that pertained to playing earnings you fucking nigger. the only thing irrelevant is you
>>1208310
you have successfully derailed my thread off topic. are you happy now anon?!
>>1208320
no because my question still hasnt been answered
>>1208270
nah dude he wants to do it naked stock.
long 100shares broker x
short 100 shares broker y
It depends on how you structured your order and if your broker lets stops hit at night.
anyone with a stop below that yellow line lost in the overnight
anyone above that blue line got fucked if their broker doesn't allow overnight trading.
>>1208326
your stop loss could be executed at a substantial higher price than what the stop loss is if the stock jumps in a short period of time like in an fda approval as you mentioned
>>1208336
all that means is my net gain would be less than if my stop loss went thru at the exact set price. im still short the exact same amount of shares. no matter how fast the spike/collapse and how much slippage there is my risk is negated. leaving only gains that only have to beat 10$ commission to be profitable
>>1208342
why dont you do this then? earnings season is just starting
>>1208342
even if slippage and commissions combine to leave me with a 2% gain on average I could make about 10 trades a month. If i start with the bare minimum 2000 for a margin account i could compound that capital 1000% by years end
>>1208343
ehhh it cant be this easy. this has to be some kind of martingale strategy i just cant see the flaw. if it were this easy everyone would do it. I just want someone to point out the problem
>>1208352
we've been pointing it out to you but you're not seeing it.
try it out if you want to be the liquidity in the market.
Or you could do regular neutral earnings plays like
strangles
and
butterflies.
Thank goodness I got all my shekels in MSFT.
>>1207992
I don't "play" earnings season. I regularly sell straddles of index ETFs. Most often is better to be a seller of options than a buyer
>>1208126
When you buy both a put and a call it's a volatility play. You make money if it falls or gains a certain amount.
Can I have a basic walkthrough on options? I think FSLR is going to kill earnings next week, how do I get started?
For example, I see 68.50 calls going for. 22 , but 69.00 calls going for. 54? Wtf? Shouldn't the 68.50 be more expensive because it's more likely to happen?
LOL MSFT
LOL PAJEET
>>1208667
There are more factors to the cost of the premium than just the strike price.
>tfw you didn't know earnings season was today and you lost over $13,000 thanks to the strong bull run in the first half of the week
I have 2 choices: bullet to the head or through the mouth?
>>1208692
What else is there besides price and expiration date?
You have a good site I can read to learn up on this?
>>1208698
https://en.wikipedia.org/wiki/Black%E2%80%93Scholes_model#Notation
Also check out Sincere's Understanding Options 2e if you're serious
>>1208352
>>1208180
The problem is that stock prices don't move continuously.
1) Buy XYZ at $15.00
2) Set stop loss at $13.00
3) Stock closes at $15.05. (Bid: $15.05, ask $15.06.)
4) Earnings release comes out.
5) The next trade is $12.00. (Bid: $12.00, ask $12.10.)
6) The stop loss order is triggered. It becomes either a market order or a limit order depending on how you set it up.
6.1) If it's a market order, you dump your shares at $12.00, $11.99, $11.85, $11.25, and $0.01 in case the news was so bad that even the robots don't want to trade.
6.2) If it's a limit order, and you set the limit at $11.50, you sell some stock at $12.00, $11.99, and $11.85. There are no more buyers below $11.50, so you now have a regular limit order at $11.50 that waits until buyers come back into the market. If they ever do. Which they might not.
6.3) If you set your stop-limit order at $13.00, get in line with everyone else who wants to sell between the current market price of $12.00 and your limit of $13.00. There's no guarantee the price will bounce back to meet your limit price.
7) And that's why it doesn't, and cannot, work with stock.
Options are different: you can structure the transaction such that in the 25% of cases where the gap up/down is big enough, you make about 3 times the money you lose during the 75% of the time the stock goes nowhere.
Or you can structure your position the other way around; 75% of the time the stock goes nowhere and you pocket $1 in premiums, and 25% of the time the stock goes apeshit and you lose about $3 on one of the short legs.
The whole point of derivatives is to hedge risk; if there's ever a risk-free trade, the prices of the options will adjust to reflect it.
To phrase that in options terms and long/short straddles:
If XYZ trades at $15 and is rumored to be taken over for $20 soonish, a $15 call might trade for $3 (reflecting the rumor mill), and a $21 call might trade for $1 (reflecting the possibility that the price might be higher than the rumored $20.)
When the news hits, a $15 call will trade for $4.99, reflecting the possibility that the deal doesn't go through, and a $21 call will trade for $0.01, reflecting the miniscule probability of a white knight showing up.
Before the news hits, implied volatility (loosely measurable by adding the price of an at-the-money call and an at-the-money put) is high because nobody knows what will happen, and they're willing to pay a premium to hedge against the risk. After the news hits, implied volatility drops; everybody knows what the price is.
Homework: Pick a random biotech with an upcoming PDUFA date. Do not trade it. Observe the prices of the options before, and after, the announcement. Doesn't matter if the company wins/loses, IV will always be lower after the announcement. Before announcement, the options prices are saying "this $10 stock could be anywhere from $5 to $15 by expiration," and after the announcement, they're saying "within $0.50-1.00 of wherever the current price is."
>>1208732
But even if im left holding some i dont lose. If i sell 75% of each at the bottom i make a profit and the remaining stocks cancel out. No matter how you twist ot i have 0 risk involved. Im waiting for someone to show me why it wouldnt be profitable. So far nobody has
>>1208761
you're assuming you can time the bottom/top at the different brokers. that's what you're not thinking about, or foolishly assuming you can predict extremely short term moves.
>>1208667
Do you think price will go up?
How much are you willing to bet (lose) that it will?
That's the basis of options. Go on some tutorial that you can understand before you trade. There's alot more you need to know
>>1208740
do you also trade futures?
>>1208803
i want to get into trading options/futures, but the thing is free tutorials are not comprehensive at all
>>1208126
It's a volatility play to do both
>>1208780
Im not trying to get in at the bottom or the top of anything. I get in before a major catalyst like an fda approval
>>1208698
Investopia
>>1207992
They are actually lots of fun. But what is going to mess you up is that volatility changes a lot after earnings (generally goes down). And the change in volatility may be larger than the change in the price of the underlying. So even if you think the spread is structured nicely with regards to the price change (and should make money whether it goes up or down), it turns out that the change in volatility will screw your return profile up. Run some backtests on previous earnings dates to see the effect.
>>1210003
i already tested if i had bought some spreads on NFLX with $800 and used half to buy calls/puts that were a dollar or two OTM the calls would be worthless (i wouldve put a stop loss) and the puts wouldve been worth a llittle more than %300 of what i wouldve paid and I would net $600 plus whatever i set the stop loss on the calls
>>1210145
Checks out! If we assume 10/14/2015, Quarter 3 result release date (http://www.nasdaq.com/earnings/report/nflx).
The price the previous day was 109.73, annual volatility had been maybe 50%. A call strike could be 111 and put strike could be 108.5.
The price the next day after earnings was 101.09, and volatility was maybe 48%.
For 800 dollars in calls and puts expiring at month end you would have bought 85 puts and 84 calls for prices 4.71 and 4.75 (798.74 dollars in total).
The day after you would have sold those puts and calls at prices 9.38 for the put and 1.42 for the call (917.23 dollars in total).
That's a profit of 118.49 dollars with an outlay of capital of 798.74 or a 14.83% return over a couple of days (without counting in transaction costs for buying and
selling four times).
(Calculations based on BS prices and theoretical volatilities calculated from daily return data. What could go wrong? Everything in the intraday.
This assumes that you could trade at the closing price of the options and that the time left to option maturity works out like it does.)
>>1207992
shameless self bump
going to buy some option spreads for AAPL on Tuesday before earnings report
>>1211619
that's cool m8, just know that you'll be buying everything from me :^)
>>1211687
you write naked options?
>>1207992
shameless self bump
two more days til aapl earnings report
