Trading Earnings Announcements

[IIC]

I guess a true straddle would be to buy an equal number of calls and puts at the same strike price and the stock needs to go up or down significantly for the gainer to outweigh the loser.

I believe it would be equal dollar amounts rather than the same number of puts and calls...Doug

[peanuts]

That was a good strategy in the tech bubble...But over the long haul it rarely works as far a s I know...Doug

I think the reason that it worked so well during the tech bubble was that there were wild moves after earning statements. People were giddy to hear that there were X number of "hits" and how it was a 400% increase from the previous quarter and blah blah blah... That led to huge gaps and then run-ups afterwards. That kind of situation was better than good for a straddle. I think that just because it was good then had nothing to do with the tech bubble, but everything to do with big moves after some kind of announcement. So, even in today's environment, if you can find a stock with nice post-earnings or post-news movement, this strategy still works.

I believe it would be equal dollar amounts rather than the same number of puts and calls...Doug

That is how I have always understood the strategy... equal dollar amount invested on either side of the trade.

[em26jamie]

After reading a little bit more, the different strike prices used here would be considered a strangle, not a straddle. Terminology aside, the bigger up or down moves in the stock price is what makes it work. So when NFLX went up 23% after earnings, it would have worked great. Or for GMCR, especially last fall when it dropped 40%.

[peanuts]

Tomorrow... March 6... Pandora Media... ticker, P

Looks like a great strangle, er straddle, er, whatever... just looks like a good candidate

[peanuts]

Tomorrow... March 6... Pandora Media... ticker, P

Looks like a great strangle, er straddle, er, whatever... just looks like a good candidate

Looks like this is going to work nicely. Down 20% after hours and now down 26%+ pre-market... These puts are going to be triple what I paid

My trade was this:
100 Mar $15 calls @ .75
85 Mar $14 puts @.90

I had a feeling that it was going to be a downside move, so I went slightly heavier on the put side.

[peanuts]

Looks like this is going to work nicely. Down 20% after hours and now down 26%+ pre-market... These puts are going to be triple what I paid

My trade was this:
100 Mar $15 calls @ .75
85 Mar $14 puts @.90

I had a feeling that it was going to be a downside move, so I went slightly heavier on the put side.

I just sold the $14 puts for $3.30, the $15 calls are worthless, so I'll hold onto them.

Total expense: $7500 + $7650 + $92.50 (commission) = $15,242.50
Total income: $28,050
Total profit = $28,050 - $15,242.50 = $12,807.50

I see Vegas lights in my future

[riverbabe]

GEEZ LOUEEZ!!! Nice one Pea.

[em26jamie]

I was on it too, but I chickened out at the last second. Oh well.
I'm glad someone made out on it. Great job.

[em26jamie]

One of our favorite stock reports tomorrow night, ULTA. I won't be in the trade because I'll be traveling on Friday. I hope someone makes some more money off them.

[peanuts]

Clean Energy... one of my favorite stocks CLNE

Reports today, after the close... might be interesting. Stock has run up recently. Could go higher, could go lower, could just do nothing at all

Would you play the strangle?