Question answered: first losses in 0.08 delta earnings trades

I knew it couldn't last, but not with 3 in one day!

Garmin:

CVS:

This was a shortened week, with Presidents' Day keeping the markets closed on Monday the 18th ...

CVS and GRMN (Garmin) both went well outside their expected moves ... both were defined-risk trades and CVS was just on the edge of the short strike when I closed it the next day, so not a big loss. GRMN blew through both short and long strikes and stayed there all week when I closed it for a full loss. DVN was a short strangle that was worth multiples of its initial credit when I closed it early Wednesday, but not as bad as GRMN.

But everything else won: NTES, HLF, HFC, BHC,  DBX,  BIDU,  ROKU,  FSLR ... that's 25 and 3 (89.285%)  overall for the two weeks and still showing a profit.

Even though I have set "close for 50% of the credit" orders, sometimes it's better than that. ROKU I sold for 58 cents and would have closed it for 29 cents or better ... but 'better' turned out to be only 17 cents! If only I'd had 30 contracts instead of the 3 I sold ...

But looking at the largest loss in GRMN: what if I had sold a strangle instead?

I'd have gotten double the credit: 40 cents or so a contract, but the spike in price was about $10, from about $71 to over $81 ... the short strike would have been the same place I had it ($78) and the price I'd have closed it for should have been just a little different than I closed it for, not until Friday, for $3.04. So not very much difference in this case; I'll have to continue monitoring this.

In other news: I continue to be transfixed by very short timeframes and so sold a call spread in /NG, expiring Monday:

• short the $2.70 call
• long the $2.72 call

Credit $130; total risk $350 ... right now (Friday 7:34 pm PST) the price of the current /NG future is 2.698 ... if it will just stay there through Monday, that will be good. Spring is imminent, right?

I also have on the strangle on /NGJ9 options expiring in 32 days at 2.55 and 2.93 ... credit I got for this one was $330, which I want to get 1/2 or $165 ... fingers crossed. Of course I'd love to win both. 

More next week ...

NDS mystery solved: new ticker symbol XQO

For some reason, the NDX a.m. settlement value, ticker symbol NDS, hadn't been updated since December .. what was happening?

I received an update from the Tastyworks tradedesk on this: CBOE is no longer involved with NDX, it's strictly Nasdaq, and they've given the settlement value a new ticker symbol:

XQO

Good to know ... it's value from last Friday was just far enough inside the short NDX strike (7075) to pretty much eat up my entire profit ... I got a $4.85 credit (i.e. $485), and since the XQO closing value was 7079.35, that takes up $435 of my potential profit ... leaving me with exactly $50.

Better than last month, but not what I was visualizing.

However, back to our new friend the earnings trades ... we'll have to see if 17 in a row is an outlier  or typical before we can figure out how profitable this will be over time ...

More this weekend ...

A nearly perfect week (up 10.7%!) after switching to 0.08 delta earnings trades

I put on 17 earnings trades this past week without a loss!

The underlyings:

• NVDA
• PXD
• CTL
• EQIX
• NTAP
• YELP
• CSCO
• BFAM
• TEVA
• OXY
• AKAM
• ATVI
• TRIP
• UA
• RE
• SHOP
• MOH

There were almost all at the 0.08 short delta, with a few at the 0.10 delta when there was no bid at the .08 delta.

I had said previously I wasn't interested in doing anything herculean to "scratch" an undefined trade gone wrong, and that's still true. But I did start putting on undefined risk trades in lower priced ($35 or less) underlyings where the margin per contract is around $300. This I could afford to lose without doing anything but closing out and going on to the next one.

I did trade an Iron Condor (i.e. defined risk) on NVDA, which was quite volatile (therefore paid pretty well even for a defined risk trade, around 10% ... of which we took half, so just over 5% on an overnight trade: not bad!

Overall this plus the NDX trade, discussed momentarily ... gave us an up 10.7% week on the main account we were trading this strategy.

As for NDX ... I made the change I discussed a few weeks ago, putting this on closer to 1pm PST close of trading instead of the 9:45 a.m. PST I had been using.

Unfortunately, this made only about 1/4 of the profit that it would have if expiring worthless ... NDX was going higher Friday morning and closed I guess around 7078 where my short strike was 7075. This was the only glitch in an otherwise perfect week.

I say "I guess" because CBOE or CME or whoever's in charge of it has apparently stopped publishing NDS, the daily settlement value that the NDX a.m. settlement is based on. Tastyworks certainly has it, though they don't publish it on their UI.

This is just a minor aggravation ... what  I really enjoy about earnings trades is the fact that they're OVER overnight. I don't typically get up at 6:30 when the market opens, but when I do get up and look at my phone and see the Tastyworks app has informed me that I got 6 fills on the 6 (closing) trades I had on, well wahoo!

2nd week earnings: the .16 delta doesn't cut it (at least for defined risk trades)

I traded mostly .16 delta iron condors this past week, with two exceptions:

TWTR (Twitter), where I sold a .16 delta strangle (for $80, netting $40 since I closed it at 50% of net credit received) ... and:

Snapchat (SNAP), where I sold two 6 strike puts (the stock was at $6.70 or so) for $15 each, netting $30 ... which I got almost all of since the price collapsed to $1 at the opening the next a.m.

But the two big (100% of the amount at risk) losers were Chipotle (CMG) and Motorola Solutions (MSI) ... both zoomed up after earnings.

Overall I lost a little money this week, like 2% on one of the $19K accounts I'm trading.

So this week I'm going to go out wider, probably the .08 delta ... the problem with this is that it won't pay enough to be worth the risk for a defined-risk trade. I can do undefined risk trades in my own account, but so far I don't have permission to do them in others.

Also, the Fabulous NDX trade is available again on Thursday in place of any earnings trades ...

Fingers crossed ... more next week!

First week of trading earnings: insights and lessons learned

I traded several earnings announcements this past week, including:

Overall I just about broke even, though my idea of using butterflies didn't work as well as I had hoped.

They just aren't wide enough; I can get much wider with Iron Condors or strangles (should I decide to try this undefined-risk trade ...)

Also their prices didn't seem to collapse as fast as the widely out-of-the-money options ... I had hoped that they would just be at least 15 or 20 percent lower priced on or near the opening, but that was too rare. I wound up just taking whatever small profit was there as soon as the market opened on these butterflies.

Also, the .16 delta Iron Condor for the high-priced AMZN was plenty profitable: I risked $350 to make $150 ... of which I took only $75, 6 minutes after the opening on Thursday ... that's over a 20 per cent return.

And I goofed and traded Paccar (PCAR) even though it doesn't have weekly options! I closed the position I had in my own account for a small loss but let this run in some other accounts I'm trading to see if I can get out for a profit early next week ...

Next week: GOOGL, CMG and CBOE, among others and I'll try applying these lessons to make a profit ...

I'll report back at week's end ...