BIDU has their earnings call tonight and one interesting trade idea if you are bullish is to put on an out of the money call fly to take advantage of a strong bullish move. Below is an example taking into consideration the market maker expected move of $16:
August 3rd expiration
Buy one 260 strike call
Sell two 270 strike calls
Buy one 280 strike call
Right now the debit for the trade is around $1.50 per spread.
Plan to exit tomorrow or later this week before Friday expiration. If this trade doesn’t work you will like lose the entire cost of the trade, but if it does work you could make 20% to 50% or more.
AMZN Double Butterfly in Jul 27 Expiration. Our short strikes in the Butterflies were 1910 in the Calls and 1710 in the Puts. AMZN opened at 1876, hit a high of 1880 , and then dropped off to 1849 area. At the opening, I sold out the Call Butterfly for .36. The total cost of the Butterfly was .75. Net we lost $36 for every 1 Double Butterfly. Not bad for a cheap shot. The move in AMZN was less than the expected range of $100 , which is where we structured the short strikes of the Butterfly. Lesson Learned: Next Earnings , I will probably do this strategy , but I will pick an expiration 1-2 weeks past the earnings date to structure the Fly. Reason? It’s very rewarding but difficult to structure a Double Butterfly in the expiration that is the same week as the Earnings Release date. Doing a Double Butterfly in an expiration that is the same week as the Earnings release date requires almost precise accuracy when picking the short strikes, very difficult. It’s like making a Bullseye. Giving us an extra 1-2 weeks next time should provide just the right tweak to this very low cost and potentially high reward strategy!
FB: Bullish Butterfly in Aug 3 Expiration: B 1 175 C, S 2 180 C, B 1 185 C, .87 Debit. Today, with FB at 177.70 + 1.42. Just Sold out the Butterfly for 1.25 Credit, 43% yield in 1 day, excluding commissions!
#1 AMZN Earnings Double Butterfly in Jul 27 Expiration
B 1 1900 C, S 2 1910 C, B 1 1920 C .35 Debit B 1 1720 P, S 2 1710 P, B 1 1700 P .32 Debit
#2 FB Bullish Butterfly Aug 3 Expiration
B 1 175 C, S 2 180 C, B 1 185 C .87 Debit
#3 SPX Butterfly Aug 10 Expiration (Didn’t get filled)
B 1 2810 C, S 2 2840 C, B 1 2865 C, 9.70 Debit.
#4 Adjustment for Tuesday’s Live Calendar in SPX
B 1 Aug 20 2940 C 1.20 (Decided to just buy a cheap call versus re-positioning the Calendar like I talked about) See video below!