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How to trade options before earnings

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how to trade options before earnings

Follow Terry's Tips on Twitter. Like Terry's Tips on Facebook. Watch Terry's Tips on YouTube. A little over a week ago, I passed on a pre-earnings trade I had made on Facebook in advance of their May 3 after-market announcement. Essentially, I bought calendar spreads long side 16Jun17 series and short side 05May17 series at the I was hoping that the stock would barely options after the announcement. Near the close, I was able to buy back all of the expiring options earnings at the strike, calls at the Sell to Open 1 FB 05 May17 I was a little too conservative. While this is certainly a nice gain for the week, it only came about because I was lucky enough for the stock not to fluctuate very much. In the future, I think I might buy more spreads at strikes below the current stock price of FB because the clear pattern around announcement time has been for the company to exceed expectations by a nice margin and the stock falls a small amount on the news. Calendar SpreadsCallsdiagonal spreadsEarnings AnnouncementEarnings Option StrategyEarnings PlayETPimplied volatilityMonthly OptionsProfitprofitsPutsStocks vs. I have been trading options just about every day the market is open for about 40 years, including some time on the floor of the CBOE. I have made large sums of money at times, and sadly have also lost money along the way. But the amazing thing about my experience options that I continue to learn things even after all these years. Trading Options Can be a Lifetime Trade Experience. If the truth be known, investing in stocks is pretty much like playing checkers. Any year-old can do it. Most people reject that idea, of course. Like the residents of Lake Wobegone, stock buyers believe that they are all above average — they can reliably pick the right ones just about every time. Buying and selling options is more like playing chess. It can be and is, for anyone who is serious about it a life-time learning experience. People with little understanding or experience buy stocks every day, and most of their transactions involve buying from professionals with far more resources and brains. Option investing takes study and understanding and discipline that the purchase of stock does not require. Every investor must decide for himself or herself if they are willing to make the time and study commitment necessary to be successful in option trading. Most people are too lazy. It is a how lot easier to play a decent game of checkers than it is to earnings a decent game of chess. But for some of us, options investing is a whole lot more challenging, and ultimately more rewarding. For example, Facebook FB has had a great start for It has gained Playing checkers and buying stock is boring. Playing chess and trading options is far more challenging. And rewarding, if you do it right. To celebrate the coming of the New Year I am making the best offer to come on board that I have ever offered. It is time limited. Invest in Yourself in at the Lowest Rate Ever. The presents are unwrapped. The New Year is upon us. Start it out right by doing something really good for yourself, and your loved ones. The beginning of the year is a traditional time for resolutions and goal-setting. It is a perfect time to do some serious thinking about your financial future. I believe that the best investment you can ever make is to invest in yourself, no matter what your financial situation might be. Learning a stock option investment strategy is a low-cost way to do just that. This consists of 14 individual electronic tutorials delivered one each day for two weeks, and weekly Saturday Reports which provide timely Market Reports, discussion how option strategies, updates and commentaries on 11 different actual option portfolios, and much more. I will email you with any trades I make at the end of each trading day, so you can mirror them if you wish or with our Premium Service, you will receive real-time Trade Alerts as they are made for even faster order placement or Auto-Trading with a broker. These Trade Alerts cover all 11 portfolios we conduct. But you must order by midnight on January 11, If you ever considered learning about the wonderful world of options, this is the time to do it. Early inwe will be raising our subscription fees for the first time in 15 years. By coming on board now, you can lock in the old rates for as long as you continue as a subscriber. I feel confident that this offer could be the best investment you ever make in yourself. And your family will love you for investing in yourself, and them as well. I hope is your most prosperous ever. I look forward to helping you get started right by sharing this valuable investment information with you. If you are ready to commit for a longer time period, you can save even more with our half-price offer on our Premium service for an entire year. This special offer includes everything in our basic service, and in addition, real-time trade alerts and full access to all of our portfolios so that you can Auto-Trade or follow any or all of them. We have several levels of our Premium service, but this is the maximum level since it includes full access to all nine portfolios which are available for Auto-Trade. Use the Special Code MAX17P. This has resulted in unusually high short-term option prices for USO the stock that mirrors the price of oil. I would like to share with you an options spread I made in my personal account today which I believe has an extremely high likelihood of success. I personally believe that the long-run price of oil is destined to be lower. The world is just making too much of it and electric cars are soon to be here Tesla is gearing up to makenext year and nearly a million in two years. But in the short run, anything can happen. Meanwhile, OPEC is trying to coax producers to limit supply in an effort to boost oil prices. Every time they boast of a little success, the price of oil bounces higher until more evidence comes out that not every country is on board. Many oil-producing companies have hated one another for centuries, and the idea of cooperating with each other seems a little preposterous to me. The good old U. Two significant new domestic oil discoveries have been announced in the last couple of months, and the total number of operating rigs has moved steadily higher in spite of the currently low oil prices. Bottom line, option prices on USO are higher than we have seen them in quite a while, especially the shortest-term options. Implied volatility IV of the long-term options I would like to buy is only 36 compared to 64 for the shortest-term weekly options I will be selling to someone else. Given my inclination to expect lower rather than higher prices in the future, I am buying both puts and calls which expire a little over a year from now and selling puts and calls which expire on Friday. Buy To Open 20 USO 19Jan18 10 calls USOC10 Sell To Open 20 USO 02Dec16 Of course, you can buy just one of each of these spreads if you wish, but I decided to pick up 20 of them. Here is the risk profile graph which shows what my spreads should be worth when the short options expire on Trade. If these short-term option prices hold up for a few more weeks, I might be able to duplicate these possible returns many more times before the market settles down. As usual, I must add the caveat that you should not invest any money in options that you cannot truly afford to lose. Options are leveraged investments and can lose money, just as most investments. I like my chances with the above investment, however, and look forward to selling new calls and puts each week for a little over a year against my long options which have over a year of remaining life. I am sorry to send you a second email message today, but I need to hurry because it will disappear tomorrow. It involves Gilead Sciences GILD. Gilead GILD announces earnings on Tuesday, November 1 st after the close. The post-announcement options before extremely expensive. Implied Volatility IV for the 04Nov16 series is 60 compared to 34 for the 16Dec16 series which expires six weeks later. Expectations are for lower sales and earnings. These facts support the idea that a big drop in stock price is unlikely after the announcement. We bought 5 contracts of exact spread today in our portfolio that trades on earnings announcements. Any price higher than that will also result in a profit. This is the risk profile graph for this spread, assuming that IV for the 16Dec16 series falls by 5 after the announcement:. That is the amount that you will tie up in your account for this week, however. Not bad for a week. As a Halloween special, we are offering the lowest subscription price than we have ever offered — our full package, including several valuable case study reports, my White Paperwhich explains my favorite option strategies in detail, and shows you exactly how to carry them out on your own, a day options tutorial program which will give you a solid background on option trading, and two months of our Saturday Report s full of tradable option ideas. Use the Special Code MAX16P. This is a time-limited offer. You must order by midnight tonight, October 31, This is the perfect time to give you and your family the perfect Halloween treat that is designed to deliver higher financial returns for the rest of your investing life. I look forward to helping you survive Halloween by sharing this valuable investment information with you at the lowest price ever. It may take you a little homework, but I am sure you will end up thinking it was well worth the investment. Do it today, before you forget and lose out. This offer expires at midnight tonight, October 31, Auto-TradeCalendar SpreadsCallsCredit Spreadsdiagonal spreadsEarnings AnnouncementEarnings Option StrategyEarnings PlayGILDimplied volatilityMonthly OptionsPortfolioProfitPutsRiskStocks vs. IBM announces earnings on October 17, less than three weeks from now. I would like to share with you a strategy I used today to take advantage of the extremely high option prices which exist for the option series that expires on October 21, four days before the announcement. One of my favorite option strategies is to buy one or more calendar spreads on a company that will be announcing earnings in a few weeks. The option series which expires directly after the announcement experiences an elevated Implied Volatility IV relative to all the other option series. A high IV means that those options are relatively expensive compared to all the other options that are trading on that stock. IV for the post-announcement series soars because of the well-known tendency for stock prices to fluctuate far more than usual once the announcement is made. While there is some historical evidence that the stock usually moves in the opposite direction that it did in the week or two leading up to the announcement, it is not compelling enough to always bet that way. In the week leading up to the announcement, IV for the post-announcement series almost always soars, and the stock often moves higher as well, pushed higher by investors who are expecting good news to be forthcoming. For that reason, I like to buy calendar spreads at a strike slightly above the current options of the stock in hopes that the stock will move toward that strike as we wait for the announcement day. Remember, calendar spreads make the greatest gain when the stock is exactly at the strike price on the day when the short side of the spread expires. If I were to sell one of these weeklies on 6 occasions, I would get my entire investment back and still have 19 more opportunities to sell a weekly call. Another way of moving forward would to sell new calls with a month of remaining life when the 21Oct16 calls expire. It would take three such sales to get all of my initial investment back, and I would have three more opportunities to sell a one-month call with all the proceeds being pure profit. In any event, over the six-months that I might own the 21Apr17 calls, I will have many chances to sell new calls and hopefully collect much more time premium than I initially shelled out for the calendar spread. There may be times when I have to buy back expiring calls because they are in the money, but I should be able to sell further-out short-term calls at the same strike for a nice credit and whittle down my initial investment. I also made this trade today:. This is the same calendar spread as the first one, but the sell side is the 14Oct16 series which expires a week before the announcement date week. If IV for the 21Oct16 series does escalate from its present 25 as it shouldI might be able to sell calls with a week of remaining life for a higher price than is available right now. Option players could celebrate, however. We have a lot of happy subscribers who follow this portfolio either on their own or through the Auto-Trade service at thinkorswim. That is the story I would like to share with you today. Update on Facebook Earnings Announcement Play. On May 11,I told you about two trades I was making in my personal account. You can see the entire blog which explains my thinking on our blog page. I sold this series because it would expire just after the July 27 earnings announcement. My option trading made 17 times more money than the stock buyers would have made. As with all investments, you should only use money that you can truly afford to lose. Options are leveraged investments, and unless you totally understand the risks, you can easily and quickly lose more money than you could with the equivalent investment in the purchase of stock. I think it is worth a little work to educate yourself about the trade and potential rewards of trading options. Auto-TradeCalendar SpreadsCallsCredit Spreadsdiagonal spreadsEarnings AnnouncementEarnings Option StrategyEarnings PlayFacebookFBimplied volatilityMonthly OptionsPortfolioProfitPutsRiskStocks vs. Today I would like to suggest an options trade on Facebook FB. It will involve waiting 6 weeks to close out. To my way of thinking, it should be worth the wait, especially since I think that there is a very small likelihood that this play would end up losing money. Over the past month I have suggested legging into calendar spreads in advance of an earnings announcement for 7 different companies FB, COST, TWX, TGT, SBUX, and JNJ, and ABBV. In every case, I was personally successful at creating a calendar spread at a credit and guaranteeing myself a profit no matter where the stock price ended up after the announcement. You should have been able to duplicate every one of these successes as well. The ultimate gain on these spreads will depend on how close the stock ends up to the strike price of my calendar spread after the announcement. The nearer to the strike, the greater the gain. It is fun owning a spread that you are certain will make a profit, no matter what the stock does. We will not be guaranteed a profit, but it looks how likely to happen if our assumptions hold up. In each of the last two quarters when FB announced earnings, they were better than the market expected, and the stock rallied nicely. Who knows what will happen next time around when they announce once again on July 27? It tends to be fairly flat, or edges up a bit in the lulls between announcements, and often moves a little higher in the week or two before the announcement day. Here is the risk profile graph which shows the profit or loss from those trades when the short before expire on July 15th:. I think the stock is quite likely to end up inside this range. As encouraging as this graph looks, I think it considerably understates how profitable the trades will be, and that has to do with what option prices do around earnings announcement dates. Since stock prices tend to have large fluctuations both up and down after the results are made public, option prices skyrocket in anticipation of those fluctuations. When the 15Jul16 options expire on July 15, there will be a weekly options series available for trading that expires just after the July 27th announcement. It will not become available for trading until 5 weeks before that time, but it will be the 29Jul16 series. Implied Volatility IV of the 15Jul16 series is currently 26 and the 16Sep16 series has an IV trade When the 29Jul16 series becomes available, IV will be much higher than either of these numbers, and should soar to near 60 when the announcement date nears it grew even higher than that a few weeks ago before the last announcement. In other words, the strategy I have set up today by buying the above two calendar spreads is an admittedly complicated way to leg into two calendar spreads at a large credit, and guaranteeing an additional profit as well. I will update these trades as we move forward, and let you know if I make any adjustments. If you make this investment, as is true with all options investments, you should do it only with money that you can truly afford to lose. If you do choose to make it, I wish both of us luck over the next two months. Earnings the past month I have suggested legging into calendar spreads in advance of an earnings announcement for 4 different companies. In every case, you should have been able to duplicate my success in creating a calendar spread at a credit. These spreads are absolutely guaranteed to make a profit since the long earnings of the spreads has more time remaining and will always be worth more than the short side, regardless of what the stock does after the earnings announcement. Today I would like to suggest two more companies where I am trying to set up calendar spreads at a credit. More Legging Into Pre-Announcement Calendar Option Spreads. First, an update on the Facebook FB pre-earnings play I suggested last week. Earlier, I showed how you could leg into a calendar spread in FB at the strike, and this proved to be successful. I was able to execute all three of these spreads in my account at these prices, and you should have been able to do the same. We were hoping that the stock could end up inside our range of strikes — but we were not so lucky. This week, on Monday morning, I looked at Costco COSTone of my favorite stocks which reports earnings on May The options series that expires just after this announcement is the 27MAY16 series. Implied Volatility IV for those options was 21 and the 27MAY16 series was only I expect the difference between these IVs to get much higher over the next couple of weeks mostly, the 27MAY16 series should move higher. I still like the company and its prospects, so I placed another order to buy 10JUN16 I then placed a good-til-cancelled order to sell 27MAY16 That has not executed yet. Another company that looked interesting was Target TGT which announces earnings before the bell on May IV for the 20MAY16 series was 27, only barely higher than the 3JUN16 series of 24 this difference should get bigger. Once again, I apologize options I did not get his trade possibility out to you in time for you to copy it. If the stock rises or IV of the 20MAY16 options gets larger as it shouldanother credit calendar guaranteed profit spread should be in place. In the last few weeks, I have both told you about and used this strategy for SBUX, JNJ, FB, and TWX. Now I have added COST and TGT to the list. In each case, I bought a slightly out-of-the-money call a few weeks out and immediately placed an order to sell the post-announcement same-strike call so that I would create a calendar spread at a credit. Facebook FB announces earnings tomorrow, Wednesday the 27th, after the close. There is still time to place what I think will be a dynamite options play. You have until the close tomorrow to get these spreads in place. Over the past few weeks, I have suggested legging into calendar spreads at a price slightly above the current stock price for companies that would be announcing earnings about two or three weeks later. The underlying idea of these spreads is that, 1 in the days leading up to the announcement, the stock tends to drift higher as hope for a positive announcement grows and, 2 implied volatility IV of the option series that expires directly after the announcement date almost always soars because big moves in the stock often take place right after results are disclosed. In my personal account, in the last few weeks, I have both told you about and used this strategy for SBUX, JNJ, and FB. This means I not only made a small profit at the time, but I was guaranteed a much larger profit when the short calls expired. The closer the stock price ends up to the strike price, the greater that profit will be. Last week, I also tried this strategy with Time Warner TWXanother company I like. This was executed the following day, and I now own a calendar spread that is guaranteed to make me a profit. TWX announces on May 4 before the open and I will close out the calendar two days later when the 6 May 16 calls expire. There is something wonderful about owning an option spread that is guaranteed to make a profit. The only question mark is how big that profit will be. FB announces after the close tomorrow, April It is too late to leg into a calendar spread like I did for the above 4 companies, but it is not too late to take advantage of some huge IV advantages. IV for the 17 JUN 16 series is only These IVs make the FB calendar spreads exceptionally cheap right now, at least to my way of thinking. These prices are a little more than the mid-point of the bid-ask range for the calendar spreads. You should be able to get these prices. If that comes about, I should more than double my investment in less than a week. This book may not improve your golf game, but it before change your financial situation so that you will have more time for the greens and fairways and sometimes the woods. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA. I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. Neither tastyworks nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. Options are not suitable for all investors as the special risks inherent to options trading my expose investors to potentially rapid and substantial losses. Please read Characteristics and Risks of Standardized Options before investing in options. Vermont website design, graphic design, and web hosting provided by Vermont Design Works. Buy to Open 1 FB 16Jun17 calls FBC Sell to Open 1 FB 05 May17 Trading Options Can be a Lifetime Learning Experience Friday, April 7th, I have been trading options just about every day the market is open for about 40 years, including some time on the floor of the CBOE. Today I would like to talk about trading options with an analogy. Terry Trading Options Can be a Lifetime Learning Experience If the truth be known, investing in stocks is pretty much like playing checkers. Invest in Yourself in at the Lowest Rate Ever Friday, December 30th, To celebrate the coming of the New Year I am making the best offer to come on board that I have ever offered. Invest in Yourself in at the Lowest Rate Ever The presents are unwrapped. Here is the risk profile graph which shows what my spreads should be worth when the short options expire on Friday: USO Risk Profile Graph December Option Idea Which Must Be Executed Before Market Closes November 1st Tuesday, November 1st, Option Idea Which Must Be Executed Before Market Closes November 1st I am sorry to send you a second email message today, but I need to hurry because it will disappear tomorrow. It involves Gilead Sciences GILD Gilead GILD announces earnings on Tuesday, November 1 st after the close. This is the risk profile graph for this spread, assuming that IV for the 16Dec16 series falls by 5 after the announcement: GILD Risk Profile Graph Oct 31 IBM Pre-Announcement Play Friday, September 30th, IBM announces earnings on October 17, less than three weeks from now. Terry IBM Pre-Announcement Play One of my favorite option strategies is to buy one or more calendar spreads on a company that will be announcing how in a few weeks. I also made this trade today: Terry Update on Facebook Earnings Announcement Play On May 11,I told you about two trades I was making in my personal account. Here is the risk profile graph which shows the profit or loss from those trades when the short options expire on July 15th: Face book Risk Profile May More Legging Into Pre-Announcement Calendar Option Spreads Tuesday, May 3rd, Over the past month I have suggested legging into calendar spreads in advance of an earnings announcement for 4 different companies. Terry More Legging Into Pre-Announcement Calendar Option Spreads First, an update on the Facebook FB pre-earnings play I suggested last week. Last Minute Facebook Earnings Play Tuesday, April 26th, Facebook FB announces earnings tomorrow, Wednesday the 27th, after the close. Terry Last Minute Facebook Earnings Play Over the past few weeks, I have suggested legging into calendar spreads at a price slightly above the current stock price for companies that would be announcing earnings about two or three weeks later. Search Blog Search for: Stock Options Straddles Strangles Terry's Tips thinkorswim VIX Volatility VXX Weekly Options Weekly vs. Monthly Options William Tell. Success Stories I have been trading the equity markets with many different strategies for over 40 years.

Buying Options Going Into Earnings

Buying Options Going Into Earnings

3 thoughts on “How to trade options before earnings”

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