Although I am agnostic towards religion bordering on Atheism (In fact, I read an article claiming that religion agnostic people are basically coward atheists – pretty funny). But I have some sort of belief in an external power which we have no idea about. I believe we are ants doing our business, bashing our boss, hating traffic, but we have no idea what truly exists out there.
Anyway, back to trading and making some moonaay!!! So, AAPL got slaughtered after their Sept 10th 2013 annoucement right? And I lost a decent amount of money (90% of the traders out there will tell out about how much they made but will stay mum on when they lost). But hey! I know when a stock is over-extended – Just from experience – either to the upside or to the downside. That is what makes me monay and lots of it too. Let us be conservative and average it out to a pocket change of $10k a month. Doesn’t sound right? Right? Ok then F.O and don’t read this……I must be one of those spam binary options bloggers on youtube!
Anyway, what I want to say here is…when any stock with solid fundamentals pulls back crazy like this, you don’t short……..you go long! (Why? Because retail traders like you and me are famous for showing up late to the party. By the time we hear the bad news….the down move is already over! Does that answer your question about “Man!! I am unlucky…when I buy a stock it falls and when I short …it goes up) That is what makes you money. TSLA..when it pulled back to $100 from an analyst bad-rating, I loaded up like no tomorrow. Same thing happening here with AAPL!
I don’t believe in cluttering up your screen with 10 technical indicators and trying to act like you know the future. However, some of them are very useful. Take, Keltzener channel for example; I love this indicator. It doesn’t help me pick a stock but if I know a stock and I have a directional bias, it gives me exact entry points to get into a trade. And it works nicely on a 1, 5, 15 min, 1 hour, or 1 day chart the same.
I will take GDX as an example. Look at the chart below. I was bearish on GDX around 5/28 but I didn’t know when to put on the bearish play. Keltzner channels is there to help…What you do is you wait for the stock to cross the upper end of the channel (if you are bearish). In my case it was between 5/30 – 6/6/2013. I sold a $30-$35 bear call spread on 6/3 and closed it today for a maximum profit.
Bottomline, reversion to the mean does not always apply to Volatility but to Stock Prices too.
So far, earnings season has been good for me. I played mostly Iron Condors at .09 or .10 delta positions. But as you may have read before, Iron Condors mostly win, but they do lose sometimes and then the loss is huge. I am writing this blog entry not only to put forth an idea or two to save your losing earnings Iron Condor but hoping that others can leave comments with their ideas too.
- My Earnings Plays so far:
- AAPL – Success
- NFLX – Success
- HLF – Success (just now. Ha!)
- FFIV – Success
- BIDU – All previous profits got Wiped Out !!!! STOP!!! Details below
Day before earnings BIDU @113.08 IV = front 94%
expected move = $7 i.e 6.19%
Iron Condor credit = .40c
(10 delta) 125/130 call = will absorb 10.6% move
(10 delta) 101/97.5 put = will absorb 10.6% move
So, all the above plays gave me nice returns day after day. But BIDU jumped 20%. I had to take the huge loss and just close my Condor.
But, I still managed to save my ass. Since the option pricing and the actual move were so completely disproportionate, I just had to make a directional assumption that the stock will retrace. I just waited for the stock to start falling, once it did, I just bought a naked PUT. Then when the stock hit bottom and was clearly oversold, I sold the PUT and bought a CALL. Not only did I cover my loss but actually made a decent profit.
So, is that a strategy to recover from a failed earnings Condor. Absolutely NOT!! eg. If you had put on a Facebook (FB) earnings condor, you would have been wiped out and then some. And if you had put on a strategy like above, you would be heading towards bankruptcy.
The only takeaways really for me are :
- Stay away from stocks which have been coiling up like a Python for some time. FB is the biggest example. It was a dead stock for months.
- Looking at earnings history and stock movement during earnings helps. With FB there is hardly any history.
- Finally, if none of the above are true and the stock still does a wild move, just keep your eyes open for a bounce trade. It just might be possible to recover from your failed Condor.
Please leave any comments if you know of any other ideas to recover from an Iron Condor during earnings. Or if you think any other strategy is superior like a back/ratio spread.
ZNGA is basically an underdog (right now at $2.22). I have immense respect for Mark Pincus and have faith that he can get the company out from the dumps.
Having said that. Here are my positions with ZNGA so far :
- SOLD 3 Jan 19th $3 PUTS for $256
- SOLD 5 Mar 16th $3 PUTS for $326
- SOLD 5 Jun 22nd $2.5 PUTS for $330
- HOLD Equity 500 shares @$3. Total invested $1500. Current Value $1100
- UPDATE Nov 26th – ZNGA really seems to have bottomed out now and is showing signs of recovery. The stock is at $2.43 and my conviction is showing hope..the puts I have sold are becoming cheaper and my equity is gaining back its value.
This is almost a faith play for me due to my confidence in Zynga and M. Pincus. Obviously, the goal is for the PUTS to expire worthless and I keep my $912 in profits. But even if it gets assigned to me, I see this company recovering pretty soon.