On top of my mechanical naked index put selling, I also make a few regular options trades every week. If there is any interest, I'd be willing to post some of them so people can follow along. I'd love any of you other option traders to do the same if you'd like to.
Mods...feel free to move this to the Stock Analysis forum if you think that's where it should be.
A lot of my option trades are very short term and related to earnings coming out. I set up a trade that has a 4-1 or higher risk reward ratio. If I'm wrong about which way the stock is going after earnings I lose money obviously, but if I'm right, I can make 4+ times more than if I'm wrong. Based on this math, even if I'm only guessing and known nothing about the company itself, I still make money if I "guess" right half the time.
When earnings come out after hours, the stock normally goes crazy right off the bat but a lot of times if settles right back close to where it was. You cant trade options after hours but you can trade stocks, so I'm looking for a way to lock in gains on my option trade after hours. So here's a question before I post any real trades.
This is a real trade I made on Thursday. Texas Instruments was doing a mid quarter update and issuing guidance for next quarter. I bought a put butterfly using the Dec 26 / 28 / 30 strikes. My maximum profit comes with TXN at 28. TXN was at 29.75 or so.
After hours it dropped like a rock. Before the bell Friday morning TXN was at exactly 28. If it opened at 28 and I closed the butterfly, I had approx an $8000 profit. The question for anyone who knows is this: Could I not buy X number of TXN shares so if it rises before the market opens, I make enough money on the stock to make up for the money I lose in the option trade between now and then and lock in gains that I have even though I cant close out the option trade when the market is closed?
TXN ended up opening at 28.60 or so and I still had a $3500+ profit. I was driving to the airport to pick up relatives and by the time I got there and closed the trade from my phone, TXN was at 29.25 and I only made $1280 on the trade (minus commission).
PS..risk / reward on this trade was max loss of $2880 and max gain of $13120 or 4.5-1
Mods...feel free to move this to the Stock Analysis forum if you think that's where it should be.
A lot of my option trades are very short term and related to earnings coming out. I set up a trade that has a 4-1 or higher risk reward ratio. If I'm wrong about which way the stock is going after earnings I lose money obviously, but if I'm right, I can make 4+ times more than if I'm wrong. Based on this math, even if I'm only guessing and known nothing about the company itself, I still make money if I "guess" right half the time.
When earnings come out after hours, the stock normally goes crazy right off the bat but a lot of times if settles right back close to where it was. You cant trade options after hours but you can trade stocks, so I'm looking for a way to lock in gains on my option trade after hours. So here's a question before I post any real trades.
This is a real trade I made on Thursday. Texas Instruments was doing a mid quarter update and issuing guidance for next quarter. I bought a put butterfly using the Dec 26 / 28 / 30 strikes. My maximum profit comes with TXN at 28. TXN was at 29.75 or so.
After hours it dropped like a rock. Before the bell Friday morning TXN was at exactly 28. If it opened at 28 and I closed the butterfly, I had approx an $8000 profit. The question for anyone who knows is this: Could I not buy X number of TXN shares so if it rises before the market opens, I make enough money on the stock to make up for the money I lose in the option trade between now and then and lock in gains that I have even though I cant close out the option trade when the market is closed?
TXN ended up opening at 28.60 or so and I still had a $3500+ profit. I was driving to the airport to pick up relatives and by the time I got there and closed the trade from my phone, TXN was at 29.25 and I only made $1280 on the trade (minus commission).
PS..risk / reward on this trade was max loss of $2880 and max gain of $13120 or 4.5-1