SOM TV Trades from Tuesday Jul 31

AAPL  Iron Condor for Earnings in the Aug 3  Expiration

S 1  Aug 3  200 C, B 1  Aug 3  205 C,  S 1  Aug 3  180 P,  B 1  Aug 3  175 P,  1.06 Credit

With AAPL + 8.61 at 198.90  , the Iron Condor is trading at .99, we are up a small bit. We are about 7 points from the short call strike of 200 with today, Thursday , and Friday till this trade expires. The position Greeks for 1 contract are -32 Deltas short and 15 Theta  and -4 Vega. The high today is 199.26. If we break 200, the short strike, I would adjust the trade by buying the 190/195 Call spread to narrow the width of the call side 5 points and reduce the short deltas. Bottom Line:  Earnings are out , we are up a small amount of money and have a plan if the short strike is threatened.

AAPL  Bearish Butterfly for Earnings in the Aug 10 Expiration

B 1  195 P, S 2  185 P,  B 1  175 P,  2.60 Debit. With AAPL up 8.61  at 198.60, we were wrong on this speculative Butterfly and sold it out today for 1.29 Credit. Wanted to cut the losses , we were wrong. For this butterfly to make money, we need it to go towards the short strike by next week and the Aug 10 Expiration. That would be 185 in AAPL by next week or near that price, and frankly, doesn’t look like that probably will happen. If I stayed in the Butterfly hoping for a decline in the next week, I could watch the 2.60 debit go to zero. I basically pared the loss in half.

SPOT  Iron Condor

Iron Condor in Spotify Aug 10 Expiration.  S 1  190 C, B 1  195 C,  S 1  180 P, B 1  175 P,  2.55 Credit. Currently trading at 2.45 with SPOT at 182.34, not much going on.

BIDU Earnings Trade

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.

Mark Fenton

mark@sheridanmentoring.com

Update for AMZN and FB trades from SOM TV from Yesterday

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!

Dan Sheridan

dan@sheridanmentoring.com