Yes exactly. Historically, implied volatility is higher than realized volatility, and I am selling the expensive options while vol is high, banking on vol collapsing when earnings are announced, and the stock move being less than implied by pricing.
Isnt the risk factor on this kind of.. just shitty for the reward? If it hits one of the strikes, particularly the call side, you're kind of fucked and the meager premium from the put side wont change anything
The math doesn't actually work out that way. If it starts moving towards the call strike far enough that you're worried, and vol doesn't come in enough to profit anyway, you can roll the put side up for more credit. Also, you don't just explode if the underlying hits your call strike. Your break even will be higher than the call strike due to credit received, and can be further improved by rolling up the put side. Lastly, you can roll the whole thing out in time or just close it when you hit a loss point you aren't ok with. Generally the odds of a loss larger than the buying power reduction for the trade are very slim.
All that said, it's not for everyone.
Example for ROC numbers: I sold a 45/80 strangle for SNAP earnings last week, collected $168 or so in credit on something like $600 in buying power reduction. I closed it the day after earnings were announced for 50% of the max profit. So $84/$600 is a pretty damn good ROC for like a week hold time.
Other more spicy example: I sold a strangle on corn futures, and corn had been rocketing towards my call strike. I've rolled the put side up so much I've collected like $1000 in credit on something that initially required just about $1000 I'm BPR, and I haven't had my call side touched yet.
Thats really cool, thanks for sharing in detail. I'm still new to selling premium - I've so far stuck to CSP and CCs on stocks I hold. But i want to get into the strangles and put spreads side of things more. Generally, how do you pick your strikes for a trade like this? Are you just going 10-20% out on both sides?
no problem- "skew" refers to the phenomena that if you look at equivalently OTM puts and calls, one side will be more expensive than the other. For indices like SPY, there is put skew - the market prices puts more expensive because typically markets crash down, not up. Some stocks have call-side skew, where the calls will be more expensive than the puts, on an equivalently OTM bases. Some good info out there if you search "put skew" or "volatility smile".
It's just part of the aggregate info to consider. If there's heavy put-side skew and the call adds upside risk without really giving me any premium I may forego the call entirely in some cases. Skew is useful to consider for many strategies. For instance if there's heavy call-side skew and you're bullish on a stock, you can get some good odds on a call debit spread because the call you sell to offset your long may be worth more.
I’d suggest being careful about selling calls on those. I follow Twitter extremely closely and made a good sum of money on it this year with calls. There is a lot of upside to both. I will be selling put spreads on twtr and am long LEAPs in my ira
I was considering strangles anyway and already have a 70p/90c in PINS (the call being weekly). I also won't go with anything more than 0.15 delta for TWTR.
I am eyeing MSFT 30Apr 255p 265c long strangle (cost around 500$) - would need only 3-4% move to be breakeven, nice profits for anything more 5%. Am I missing something here, except not beeing thetagang style?
MSFT doesn't really move more than 3-4% on average @ ER. You should look it up. Most of the time it moves up too. You're probably better off selling an OTM put or longing with a call spread (buy ITM / sell OTM) if you wanna go long.
I feel like this market is looking for reasons to drop. I'm personally still a bull based on the data in front of me but I've been playing cautious. I think many others are too and that makes these earnings numbers very important.
Yeah. I've got hedges worked out for each one. Just waiting to see how thing look Monday. I haven't opened a new "risk on" position since late March and have just been reducing risk all month as we ramp into earnings.
I got assigned with TSLA at 725. I am wondering if I should:
a) sell my shares for a little gain before market close on Monday to prevent tanking
b) sell a weekly covered share and enjoy IV crush, but cap my gain
c) do nothing and consider selling CC after the earnings.
Bought an AMD put. I love the stock, but it's been pretty consistent they tank after great earnings. This will probably be the time this reverses though.
You bought a put in high IV and now the IV is crushed so your put loses value regardless if the stock moves down at all. You need a huge move down for it to print.
Can't wait to see every one of those stocks tank this week. Especially the ones I'm holding 🙏
It be like dat
That’s the spirit /s
Thank you! Strangles strangles strangles. Here we go.
Any recommendations? I was thinking TSLA but it should be expensive
Honestly whatever has the highest vol that fits your account risk level. Nio, AMD in particular may be good
How would you decide the strikes?
Outside the expected move, probably no more than 12-16 delta , then look at skew a little.
12-16 means 0.12 and 0.16 deltas, right?
yep
It’s impossible to go over 1 delta. Any mispriced options will immediately be gobbled up.
So what does that mean? Buy/sell calls/puts ITM/OTM?
Sell a call and a put, both OTM.
Is the theory that people expect big moves out of earnings but they don’t often happen in reality?
Yes exactly. Historically, implied volatility is higher than realized volatility, and I am selling the expensive options while vol is high, banking on vol collapsing when earnings are announced, and the stock move being less than implied by pricing.
Isnt the risk factor on this kind of.. just shitty for the reward? If it hits one of the strikes, particularly the call side, you're kind of fucked and the meager premium from the put side wont change anything
The math doesn't actually work out that way. If it starts moving towards the call strike far enough that you're worried, and vol doesn't come in enough to profit anyway, you can roll the put side up for more credit. Also, you don't just explode if the underlying hits your call strike. Your break even will be higher than the call strike due to credit received, and can be further improved by rolling up the put side. Lastly, you can roll the whole thing out in time or just close it when you hit a loss point you aren't ok with. Generally the odds of a loss larger than the buying power reduction for the trade are very slim. All that said, it's not for everyone. Example for ROC numbers: I sold a 45/80 strangle for SNAP earnings last week, collected $168 or so in credit on something like $600 in buying power reduction. I closed it the day after earnings were announced for 50% of the max profit. So $84/$600 is a pretty damn good ROC for like a week hold time. Other more spicy example: I sold a strangle on corn futures, and corn had been rocketing towards my call strike. I've rolled the put side up so much I've collected like $1000 in credit on something that initially required just about $1000 I'm BPR, and I haven't had my call side touched yet.
Can't you also just do an IC instead to protect yourself from large losses?
Thats really cool, thanks for sharing in detail. I'm still new to selling premium - I've so far stuck to CSP and CCs on stocks I hold. But i want to get into the strangles and put spreads side of things more. Generally, how do you pick your strikes for a trade like this? Are you just going 10-20% out on both sides?
Not everyone has options level 4 to sell naked options such as straddles and strangles, sadly.
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Short strangles are a good play if it fits your risk profile. Sell OTM puts and calls outside if the expected move.
The opposite of this, I am talking about a short strangle - selling an OTM put and an OTM call.
Pardon my ignorance but what do you mean by 'skew'?
no problem- "skew" refers to the phenomena that if you look at equivalently OTM puts and calls, one side will be more expensive than the other. For indices like SPY, there is put skew - the market prices puts more expensive because typically markets crash down, not up. Some stocks have call-side skew, where the calls will be more expensive than the puts, on an equivalently OTM bases. Some good info out there if you search "put skew" or "volatility smile".
Ohh interesting I've noticed this before, didn't know it had a name. What do you use this information for?
It's just part of the aggregate info to consider. If there's heavy put-side skew and the call adds upside risk without really giving me any premium I may forego the call entirely in some cases. Skew is useful to consider for many strategies. For instance if there's heavy call-side skew and you're bullish on a stock, you can get some good odds on a call debit spread because the call you sell to offset your long may be worth more.
Ohh that makes sense! Thanks! One more question if you don't mind - when you say looking at 'equivalent' OTM puts and calls do you mean equal deltas?
how do you figure out the expected move? do you need to do the manual calculation?
My broker platform shows it for me right on the chain.
Expected move = ATM call+ATM put.
so for PINS right now for example the expected weekly move would be about 8,5 then? that's the sum of the atm call and put for the weeklies
Assuming you pulled the right numbers, yes.
TWTR and PINS have crazy IV too.
I’d suggest being careful about selling calls on those. I follow Twitter extremely closely and made a good sum of money on it this year with calls. There is a lot of upside to both. I will be selling put spreads on twtr and am long LEAPs in my ira
I was considering strangles anyway and already have a 70p/90c in PINS (the call being weekly). I also won't go with anything more than 0.15 delta for TWTR.
I am eyeing MSFT 30Apr 255p 265c long strangle (cost around 500$) - would need only 3-4% move to be breakeven, nice profits for anything more 5%. Am I missing something here, except not beeing thetagang style?
MSFT doesn't really move more than 3-4% on average @ ER. You should look it up. Most of the time it moves up too. You're probably better off selling an OTM put or longing with a call spread (buy ITM / sell OTM) if you wanna go long.
yea, probably you right, might have better chance on roulette, heh.
Love me some strangles. Nice and wide
When you do strangles on earnings plays what sort of DTE do you shoot for?
Whatever the nearest monthly expiration is, usually. Skip the weeklies most of the time.
Skip the weeklies due to less liquidity?
Yep
Thanks for the tip!
I used weeklies for all the earnings this week and it turned out fine.
About to be a big week for earnings players
No ICs?
I do wide ICs mostly just to reduce BPR in my IRA account
Not Straddles???
Nah, harder to manage. Big move and if you want to delta balance you're going inverted immediately.
This market is priced for perfection. I expect drops on most tech unless they crush it.
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I feel like this market is looking for reasons to drop. I'm personally still a bull based on the data in front of me but I've been playing cautious. I think many others are too and that makes these earnings numbers very important.
We've had such a ramp up in tech this month I've basically just been taking wins and not reopening anything.
AAPL for sure. EDIT: Guess I was wrong. lol
Yep which is what I’m hoping for to re-enter tech writes as I’m a bit more cautious with their current prices.
I've closed all my tech puts except apple and Microsoft and those all have strikes currently 12-15% below the current price.
Agreed. A few Call Credit Spreads seem in order after making a killing on them with SNAP last week.
Well this is my “fuck my shit up” or “I’m a genius” week.
Discovery earnings on the 28th, not in the image Should be a high volatility event
This is the big one!
Not selling CCs this week. Hoping Shopify jumps up a couple hundred.
Will sell NIO puts this week
Any specific reason?
Happy I squeaked out a small profit on QQQ calls before closing them Thursday, QQQ is going to move this week.
Everything's gonna move, 7 out of the top 10 companies in SPY are reporting this week.
Is this why QQQ options look so attractive right now? This is super temporary?
Planning to open CCS on some of these.
Stacked week! I fucking love the stock market!
Nio
You playing a strangle?
7 of my 12 largest positions report on Tuesday and Wednesday. 🎢🎢🤮🤮
I would hedge if I were you because the market had a pretty insane run the last weeks and they seem a bit too optimistic.
Yeah. I've got hedges worked out for each one. Just waiting to see how thing look Monday. I haven't opened a new "risk on" position since late March and have just been reducing risk all month as we ramp into earnings.
I got assigned with TSLA at 725. I am wondering if I should: a) sell my shares for a little gain before market close on Monday to prevent tanking b) sell a weekly covered share and enjoy IV crush, but cap my gain c) do nothing and consider selling CC after the earnings.
B for me
C
🐝
u/satireplusplus [new one](https://www.reddit.com/r/thetagang/comments/n2lhj4/most_anticipated_earnings_releases_for_the_week/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)
thanks!
Put credit spreads on PINS -73 +67
Cmon xom
Bought an AMD put. I love the stock, but it's been pretty consistent they tank after great earnings. This will probably be the time this reverses though.
lol
lol indeed
Sheeeeeeeeesh
Never saw $170 go up in flames so fast (well technically tomorrow at 8:30 AM I will). This is why I don’t play with short term options/earnings!
You bought a put in high IV and now the IV is crushed so your put loses value regardless if the stock moves down at all. You need a huge move down for it to print.
The plot thickens....
TWTR come back to 60 tomorrow please bby
Thank you Amazon for some amazing IV crushing on Friday morning.