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Great video. My question is how do you find the best stocks to straddle during earnings? Basically out of the thousands of companies, how do you know which ones have the highest % move probability in either direction?
Appreciate all the work you put into the channel. A question on executing Straddles. If you initially had a call position on a stock but are noticing increased volatility, is it worthwhile to add put and essentially make it a straddle position? Or is it best to close the current position and start a new one? Again love all the information, thank you!
Wow, I haven't heard anyone talk about buying straddles in a while. I bought a few straddles for the first time in late March.... best timing and returns of my 20 year trading career.
Brilliant video Thanks Just one thought about the long strangle strategy, where we buy strangle a week before the earnings and sell a day before the announcement. Our aim is to buy before the IV shoots up, so is a week before the announcement enough for this? Wouldn't two or even three weeks be better?
Hi Sean, the IV increase before earnings is not because the options are actually increasing in price. The IV increase is because the options are holding on to their value (not decaying) and the time left until they expire is decreasing. In other words, the options are getting more expensive relative to the time left until expiration. If the stock is at $100 and the 100 call is worth $5 with 7 days until expiration and two days pass and the option is still $5 with the stock at $100, implied volatility will increase. It's because the 100 call didn't lose any value over the two days time, but got closer to expiration. So, if you buy a strangle before earnings and you see IV go up, you probably won't make any money because the IV increase is not being caused by an increase in the option prices. In fact, the option prices could even go down slightly and IV could still go up. If the options do not decay as much as theta predicts, then IV will go up. Look at these images for reference: 25% IV with 7 DTE: imgur.com/Y3rfozW 29.5% IV with 5 DTE: imgur.com/iyFoosq In both images, the call and put at the 100 strike are both about $1.38. In image #1, the IV is 25% and the DTE is 7. In image #2, I reduced the DTE to 5 and increased the IV to 29.5%. The result is that the call and put are still around $1.38. This simulates what happens into earnings: option prices do not decay but the days until they expire decreases, leading to more expensive options RELATIVE to the time left until expiration. The IV increase is not caused by an increase in option prices, but by the options not decaying and getting closer to expiration. I hope this helps.
Hi Chris, You mentioned preferring to trade your straddles or iron Flys using the following Fri expiration (7-10 dte), however in both example trades you used the nearest weekly expiration, please advise
NIce video! THX! should I close the position immediately the next day after the report is released? or should I ride the profit wave for a couple more days? Is it reasonable to open a position immediately after the release of the report when the direction of price movement is already visible? What strategies to choose? simple call and put or complex?
Thanks for the excellent videos. I’ve watched majority of them. The question I have is; in a straddle strategy, can you close out the side that is unfavorable before expiration and leave the side that’s profitable - where the move is favorable. Thanks!
Someone told me Sell a Call before earnings and Buy a Call after earnings. Same strike . Calendar earnings spread. How does that work? Is the purpose of this strategy to take advantage of Low IV prior to post earnings crush?
In the example of the ROKU iron fly, my concern is that the fill would be horrendous if I tried to get out of a 4-legged trade near the opening bell right after earnings. What has been your experience? Would it be easier to exit the call spread and put spread separately?
Hi Jay, Great question. In the case of closing the position, I'd close the side that is ITM and allow the other side to expire. Or, I'd do the following: Step 1: Close the ITM short option or ITM spread Step 2: Close the OTM short option to remove the risk on the other side Doing these steps in separate transactions (and in order) will make it easier to get out of the position. You have to unwind it one step at a time.
I would have sold the straddle, but I dont agree that it is a gamble, yes the stock will either go up, down or not move, but if you sell an otm put spread, you win if stock goes up, doesnt move, or goes down a little, so its not 50/50, so its not a gamble
I see what you're saying, but greater than 50% probability of making money doesn't mean it's not gambling. >50% probability of making money means you have more risk than reward. Could easily get blown out. There's no way to know what a company's results will be when they report, or what unexpected news they will share, or how the market will digest any of the information in a 1-day period.
@@projectfinance but you are not expected to know, like when you place a put spread outside earnings, you dont know if the market will crash like it did in March, you are playing probabilities, I had this conversation with a friend who also says its a gamble, I think depending on the strategy used, if you buy a call then its 50/50, but if you sell an otm put spread, I dont see it as 50/50 or a gamble, if its not 50/50 then it is a calculated decision based on stats, so not a gamble, in my opinion, like today ill place an otm put spread on costco same week expiration, if costco stays above 297.5 tmr, easy winner, if it drops below 297.5, ill roll it 30 days out with an otm call spread to get a credit, based on websites like optionslam or earningstats, Costco opens within expected move 80% of the time i think
Regarding at 12:30, I see IV of the nearest expiration option to the Earnings week, increases 1-2 weeks leading into the earnings (prior to earnings release). But the expiration a week after that doesn't increase IV as much. Is there an edge on pure Vega play to go Long Straddle on earnings and selling prior to earnings for the nearest expiration option.
if i buy both call and put options before earning for example $500 each, then the maximum loss i would have is $500 but profite is infinite ? what do you think?
IF you pay a total of $500 then the max loss would be $500 if both options expire worth $0. Basically you need the entire position to exceed the value you pay for the position to profit. If you pay $500 you need the position to become more valuable than $500, which means a big move in either direction if you are buying calls and puts
@@danielterrero2822 It depends how much the stock falls. If the stock is at $100 and you buy the 100 straddle for $15, but the stock falls to $90, the straddle will lose money. Generally speaking, the stock price needs to move more than you paid for the straddle. So if you buy a straddle for $50, the stock price needs to move at least $50 away from your strike price to make money. It is a big movement strategy.
projectoption that makes ALOT of sense! You really changed the game for me. I will he paper trading straddles with next weeks earnings calls! Thank you again
@@danielterrero2822 You got it! Keep in mind that most of the time the stock price will NOT exceed the expected move (straddle price in earnings cycle), but there are certain stocks that have a history of moving big. I like to use the strategy on stocks with a lot of hype around them, as they can easily upset / overdeliver. This isn't a strategy I would ever recommend trading for every stock's earnings. You will probably lose money barring a few massive winners.
To follow up on my previous question. Can you close out unfavorable directions in strangle/straddle before expiration or you have close the entire position? Thanks!
Yes you can just close one leg if you want. But remember it will decay fast as its near term & IV crush will happen next day so better to close both. If you think its still bullish/bearish coming days you can roll the benefiting leg to next 60 day long period has less decay, but remember IV let it cool off before buying longer period.
Love your videos man you're one of the best, respect. I had a suggestion, I can't speak about anyone else but I'd love if you did some videos with advice on how to get out of bad trades. I can't be the only one that runs into some bad options. I sold a covered put $93 when QS was trading almost $110. I've rolled it once down to $85 and it's been difficult to roll out again. This is probably pocket change but it would be great if you had videos dedicated to getting outta jams. Thanks and keep up the amazing work. Respect.
Best dependable trading video and very much understood sir indeed a numerous thank you to Mr Romero pieto who has indeed been behind my weekly profiting in Trading helping me to grow my Knowledge of investing and making me earn more profit through his trading platform.
I never knew how to make consistent profit in the online trading market till I met Mr Romero pieto who helped me out by Trading on my behalf and also giving me a proper guidance in my trading sectors.
Mr Romero pieto trades on my behalf due to my tight schedules and he is indeed absolutely doing great, my last investment of $13,000 he gave me my ROI of $47,000 in a period of two weeks of trading isn't that amazing.
On Feb 10 2021 I bought two contracts for FedEx (FDX)for a $300 call that expires March 19 2021( few days after earnings) most advice I get tells me to sell the contract, could you breakdown scenarios on whether it's a good idea to sell the contract or exercise the option?
Hi Chris, great video. Thanks! One question: have you calculated the risk/rewards ratio of buying straddle vs strangle? Personally, I prefer buying strangle which sometimes is more exciting.
Hi ! all your videos are amazing! I would like to know if the value IVx that you see on the top right corner of the options chain , it is the Implied volatility percentile? And it refers to a specific strike of the chain ( maybe the ATM strike) or it is relative to the entire chain, and how isit determined? tks a lot
Straddle is an options strategy where you buy a call and put at the same strike price. The strategy makes money if the stock moves big in either direction, and loses money without a big enough movement in either direction.
If I was really paying attention I could have placed you in MST time zone by your voice because that's just the way we sound out west, neutral as an equal symbol.
Easy to tell you’re from Chicago, Chris. Nobody in Arizona sounds like you. Why are so many options traders from Chicago? Do school kids take lots of field trips to CBOE? 😉
@@projectfinance Great Site and I hope you will in due course have more tutorial videos and playbooks on the functionality and USP of IVolLive. Thanks and best wishes .
Not during after hours trading since the market is closed. You'd have to wait for the next trading day. By then, the stock might have reversed and could be at a worse price compared to where it traded after hours.
@@projectfinance so basically , when we close the BUY call, the shares we shorted will go away and the position will become flat overall. The long call which is being held, will it have any intrinsic value left and will shorting shares against buy calls exceed the gains or will be the same ? So the only risk we mitigate is incase the stock price falls on market open and gains flucatute, we can lock in guranteed profits. Ia that correct ?
So the iron butterfly would be the least expensive strategy to get into this trade for essentially? And still make a 60% gain on margin. That's pretty solid
Hello Chris! I am a big fan of yours, I have watched all the videos that you have posted on UA-cam the one thing I did not understand is @20.50 shorting -100 shares to lock the profit, you mean selling 1 call option contract or 100 or other? Thanks .
Thanks for your viewership! I meant selling 100 shares of stock in after-hours trading. You need to change your order's "time in force (TIF) to "EXT" to trade shares when the market is closed. Since I own the call option, I own the right to buy shares at the call's strike price. If I short shares against the long call option, I effectively have locked in the difference between the price of the shares and the strike price of the option. I have essentially bought and sold the shares but I'm still holding a position that represents that. If I paid less premium for the strategy than the difference in the strike price/stock price, I will have secured a profit by creating a risk-free position from the combination of the positions. Example: I pay $14.50 for a 100 straddle. The stock goes to $144.50. I short 100 shares of stock at $144.50. I own a call option that allows me buy 100 shares at the call's strike price of $100. I've essentially locked in a $44.50 gain per share ($4,450 on 100) from holding these two positions at their respective entry prices. But since I paid $14.50 ($1,450) for the straddle initially, my net gain is $3,00. To unwind this position, I could either exercise the call option which would effectively cover my short stock position, or sell the call option and buy the stock back in the same transaction. I would personally do the latter. I hope this helps. Please feel free to ask follow-up questions. -Chris
Chris , thank you so much you’re frist and great mentor on UA-cam that I really like and respect in my life , you are so humble and your teaching strategies are so simple and amazing thank you so much and yes I will definitely sign in on your webpage.🙏🙏🙏🙏
If the collapse happens in the long-term options, then yes. Generally speaking, a big decrease in the short-term IV will be met with a significantly smaller decrease in the longer-term IVs. I did a video recently in which I showed the VIX Index falling 60 points and the 2-year IV fell less than 1%. It was mentioned in my "What Are LEAPS" video. I hope this helps!
Hey Chris, Would it make sense to buy LEAPs straddle for earnings following the optionslam site? I just subscribed to it and it's nice to see how the straddle prices change but I guess the price that's quoted there is the closing price at the end of market close after release, correct? Wouldn't the IV crush at the beginning of the day actually eat a chunk of the price movement for near term options? Wouldn't a strategy more like selling straddles in the near term and buying LEAPs straddles actually benefit both ways in that case since the IV crush would be much lesser in the LEAPs and Delta would actually help more for that compared to the near term (10-17 days as you mention)? What are your thoughts?
They give a straddle price before earnings and after earnings, as well as the stock price movement. The IV crush just means the options experienced a big decrease in extrinsic value because the uncertainties are no longer uncertain in the near-term options cycle (after earnings are released). Just because there is an IV crush, it doesn't mean an options-selling strategy will make money. The decrease in extrinsic value (the IV crush) could be more than offset by an increase in intrinsic value (a big change in the stock price causing the option to be ITM). Buying a LEAPS straddle would not be impacted much by the one-day change in the stock price, because the long-term options have very small gamma values, which means they won't take on direction (delta) with a small movement in the stock price. The stock price would need to move immensely for a long LEAPS straddle to show moderate gains. My thoughts on earnings are that it is primarily gambling, as your trade either makes or loses money overnight and there's no way to know exactly what a stock's price will do. But, there are certain stocks that tend to move a lot (outside the EM) for earnings, and these are the types of stocks I'll buy a straddle in, if I'm going to do anything for earnings. Most of the time I do not trade earnings for the aforementioned reasons.
projectoption that’s an interesting outlook indeed but you are right that if the price movement exceeds the volatility crush then you tend to lose. I was just looking at calendar straddles and that made a lot of sense after reading your comment. Perhaps leaps may not work but I guess selling near term and buying far out tends to work well with limited risk and limited profit that way. :) I’ve been successful in trading earnings strangles because of the probability helping a lot in terms of price moves and the iv crush giving in the rest of the profits so far with a much higher probability than straddles. Guess I’ll stick to that and maybe try calendar straddles just to see how it goes. After all, the worst I could lose is what I paid as the difference. :p
In theory, yes. If you bought the options in the weekly cycle immediately after the earnings report, the options wouldn't experience as much time decay as normal since the stock price catalyst/earnings report keeps the options pumped. You could make money if the stock made a big move either direction while holding the strangle, but it's not guaranteed you'll make money since the options still might decay slightly. Or, the market might reprice the expected earnings move lower and you'd lose money from the deflation in option prices as that lower expected move is priced in. It's not a foolproof or risk-free strategy, but the logic behind it is sound in my opinion.
Nice video! Thanks, I feel inclined to try out iron butterfly. Just a quick note, how would you use calendar spreads to take advantage of increasing iv before earnings ?
I tried OPTIONSLAM. .and i just paid for it.. it success and deducted my account but nothing change.. i am not sure, it must be something wrong with OPTIONSLAM.. i paid for NOTHING.. still the web detected me as a free user.. anyone can help? @projectoption
I don't like this guy. After I caught him in that fake story about the -$50,000 loss that was impossible to happen because the stock didn't even have the credit spread width in his story, I knew it was all for views. You talk a good one, but I see through you. Why would you tell people this horrible strategy? At the money straddles? The smart thing to do is to avoid playing earnings and don't be greedy. You can trade after earnings.
Many thanks, been searching for "options trading strategies for beginners" for a while now, and I think this has helped. Have you heard people talk about - Winoorfa Option Olegroson - (do a search on google ) ? Ive heard some great things about it and my m8 got great success with it.
Hi, I'm absorbing lots of content trying to learn options trading. I wish I could loan you money or somehow mirror your trades as I want to get started quick
Did you BUY the SHOP straddle because it has a history of exceeding the predicted move, and you SOLD the ROKU because it usually does not exceed the predicted move? Basically, I'm trying to wrap my head around how you decided to BUY one straddle and SELL the other one.
I prefer IC over straddle, as both the short call and short put can be far away. It is less risky. Straddle may work for some stocks. It depends on the underline asset. Nevertheless home work need to be done, at least to check the last 4 Q to measure the history range.
Hey, Chris! This, as always, is an amazing video! I wish you did the same one with newer data, after COVID and all the rest of the events that happened ever since until now.
Nice explanation of Long Straddle. But 1 question related to Short Iron Condor just before Earnings results. Considering that IV reaches a peak just before earnings, and then goes down fast after the earnings results, what strategy should we have to make use of this situation ? I think Short Iron Condor would be helpful, because the drop in IV will lead to drop in Vega and hence in option prices, and we can close the transaction by buying back the Iron condor. Would that be OK ?
Interesting that you don't seem to bother including commissions and fees which can have a significant effect on the ROI, especially if hedging by selling stock....
Not sure about straddles. Would like to see data on that. Seems that selling straddle this week and buying next weeks straddle is better bet. Not sure move always matches hype
Hi Chris Either long straddle would work or a short butterfly. I fail to see how both these strategies could be potentially winners as they are exactly opposite of each other. Please tell what I am missing here Thanks
Hey man, great stuff here. i came across a strange phenomena. ive been trading apple, but ive noticed that it depends almost entirely on the SPX. The SPX seems to be "dragging" Apple in whatever direction its going. this fact seems to be hiding certain signals from the view of the apple stock that can be seen from the view of SPX. how can i avoid this? do i need to shift to trading the indeces?
Hi Chris! Great question here. It's because right now the market is very volatile. Generally speaking, when market volatility increases, stock correlations get closer to 1 (they all move together and become "one"). In lower volatility environments, it's typical to see stock correlations decrease. There is actually an index that tracks index correlations for the S&P 500: www.cboe.com/index/dashboard/kcj#kcj-overview If you look at the chart you can see that in recent weeks the implied correlation has been increasing.
@projectoption / Chris: If you short the stock when the market is closed to “lock in profits”, is there a possibility where it isn’t locked in? In the example, you kind of mentioned that it’s possible if the stock drops from 580 back to or below the stock price that you originally bought the options at, or the strike price (I’m not sure which), you could lose a lot of money. Even if it’s theoretically unlikely, it still would be nice to know it is possible. With options trading, you definitely need to be aware of what’s theoretically possible, and especially bad, because it’s just so dangerous if it does happen.
no. If you short the stock at a point where the stock short price - strike price is greater than the straddle entry price, you can't lose. For instance, I buy the 550 straddle for $10 and the stock goes to $580 and I short 100 shares. My short sale price is $580 and the straddle strike is $550. I've locked in a $30 gain but paid $10 for the straddle. I make $20 no matter what.
@@projectfinance when do you close the straddle and short stock position? do I need to wait until expiration? or I will see the gain next morning which I locked in and close all the position , please help
Many thanks, I been tryin to find out about "options trading in the stock market" for a while now, and I think this has helped. Ever heard of - Winoorfa Option Olegroson - (do a google search ) ? Ive heard some super things about it and my mate got great results with it.
✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf
Great video. My question is how do you find the best stocks to straddle during earnings? Basically out of the thousands of companies, how do you know which ones have the highest % move probability in either direction?
Appreciate all the work you put into the channel. A question on executing Straddles. If you initially had a call position on a stock but are noticing increased volatility, is it worthwhile to add put and essentially make it a straddle position? Or is it best to close the current position and start a new one? Again love all the information, thank you!
Wow, I haven't heard anyone talk about buying straddles in a while. I bought a few straddles for the first time in late March.... best timing and returns of my 20 year trading career.
as a 20 year trader are u a millionaire I’m assuming?
You gave me confidence to trade options thanks for the videos 🙏🏼
Galileo7of9 No
If you have the proper guidance or someone at your edge when trading then it’s profit
Antonio Lucas so what are you trying to say about having someone..do you mean an expert trader or robots?
Erric Geatano yes. More like an expert trader. But you have the opportunity to get trading signals and you get to learn as well
Erric Geatano I recently got into an expert in binary options..he has amazing strategies that will make you enough profit
M Bonaparte I
Make use of thomasschaveyfx on telegram
So would it help to buy the option a week before the ER? What is the ideal time to buy a straddle ??
This is gold . Thx
I don’t think I have seen anything as elegant as this as earnings strategy. Thanks Chris.
Excellent presentation/ explanation; thank you!
Brilliant video
Thanks
Just one thought about the long strangle strategy, where we buy strangle a week before the earnings and sell a day before the announcement.
Our aim is to buy before the IV shoots up, so is a week before the announcement enough for this?
Wouldn't two or even three weeks be better?
Hi Sean,
the IV increase before earnings is not because the options are actually increasing in price. The IV increase is because the options are holding on to their value (not decaying) and the time left until they expire is decreasing. In other words, the options are getting more expensive relative to the time left until expiration.
If the stock is at $100 and the 100 call is worth $5 with 7 days until expiration and two days pass and the option is still $5 with the stock at $100, implied volatility will increase. It's because the 100 call didn't lose any value over the two days time, but got closer to expiration.
So, if you buy a strangle before earnings and you see IV go up, you probably won't make any money because the IV increase is not being caused by an increase in the option prices. In fact, the option prices could even go down slightly and IV could still go up.
If the options do not decay as much as theta predicts, then IV will go up. Look at these images for reference:
25% IV with 7 DTE: imgur.com/Y3rfozW
29.5% IV with 5 DTE: imgur.com/iyFoosq
In both images, the call and put at the 100 strike are both about $1.38. In image #1, the IV is 25% and the DTE is 7.
In image #2, I reduced the DTE to 5 and increased the IV to 29.5%. The result is that the call and put are still around $1.38.
This simulates what happens into earnings: option prices do not decay but the days until they expire decreases, leading to more expensive options RELATIVE to the time left until expiration. The IV increase is not caused by an increase in option prices, but by the options not decaying and getting closer to expiration.
I hope this helps.
Hi Chris, You mentioned preferring to trade your straddles or iron Flys using the following Fri expiration (7-10 dte), however in both example trades you used the nearest weekly expiration, please advise
Thanks for the tips!
NIce video! THX! should I close the position immediately the next day after the report is released? or should I ride the profit wave for a couple more days? Is it reasonable to open a position immediately after the release of the report when the direction of price movement is already visible? What strategies to choose? simple call and put or complex?
Thanks for the excellent videos. I’ve watched majority of them. The question I have is; in a straddle strategy, can you close out the side that is unfavorable before expiration and leave the side that’s profitable - where the move is favorable. Thanks!
In 99% of brokers, you are able to close a single leg of the straddle. Whether or not you should do so is another question...
Excellent Chris - Thank You
Of course!
Someone told me Sell a Call before earnings and Buy a Call after earnings. Same strike . Calendar earnings spread. How does that work? Is the purpose of this strategy to take advantage of Low IV prior to post earnings crush?
In the example of the ROKU iron fly, my concern is that the fill would be horrendous if I tried to get out of a 4-legged trade near the opening bell right after earnings. What has been your experience? Would it be easier to exit the call spread and put spread separately?
Hi Jay,
Great question. In the case of closing the position, I'd close the side that is ITM and allow the other side to expire. Or, I'd do the following:
Step 1: Close the ITM short option or ITM spread
Step 2: Close the OTM short option to remove the risk on the other side
Doing these steps in separate transactions (and in order) will make it easier to get out of the position. You have to unwind it one step at a time.
I would have sold the straddle, but I dont agree that it is a gamble, yes the stock will either go up, down or not move, but if you sell an otm put spread, you win if stock goes up, doesnt move, or goes down a little, so its not 50/50, so its not a gamble
I see what you're saying, but greater than 50% probability of making money doesn't mean it's not gambling. >50% probability of making money means you have more risk than reward. Could easily get blown out. There's no way to know what a company's results will be when they report, or what unexpected news they will share, or how the market will digest any of the information in a 1-day period.
@@projectfinance but you are not expected to know, like when you place a put spread outside earnings, you dont know if the market will crash like it did in March, you are playing probabilities, I had this conversation with a friend who also says its a gamble, I think depending on the strategy used, if you buy a call then its 50/50, but if you sell an otm put spread, I dont see it as 50/50 or a gamble, if its not 50/50 then it is a calculated decision based on stats, so not a gamble, in my opinion, like today ill place an otm put spread on costco same week expiration, if costco stays above 297.5 tmr, easy winner, if it drops below 297.5, ill roll it 30 days out with an otm call spread to get a credit, based on websites like optionslam or earningstats, Costco opens within expected move 80% of the time i think
Thanks for another great video!
Thanks for checking it out!
Can you explain how to defend your short iron condor or iron butterfly position when the actual movement exceeds the expected move.
i trade up to earnings - sell before earnings - then trade again after direction is established
Regarding at 12:30, I see IV of the nearest expiration option to the Earnings week, increases 1-2 weeks leading into the earnings (prior to earnings release). But the expiration a week after that doesn't increase IV as much. Is there an edge on pure Vega play to go Long Straddle on earnings and selling prior to earnings for the nearest expiration option.
Thanks! Im just getting started at the beggining and have no idea what's going but who cares hope to get it soon and start saving money for later :)
You can get a mentor for urself and start making profits within the space of 2weeks, I can help u with my mentor if u need help, thanks.
if i buy both call and put options
before earning for example $500 each, then the maximum loss i would have is $500 but profite is infinite ? what do you think?
IF you pay a total of $500 then the max loss would be $500 if both options expire worth $0.
Basically you need the entire position to exceed the value you pay for the position to profit.
If you pay $500 you need the position to become more valuable than $500, which means a big move in either direction if you are buying calls and puts
This is excellent. I learned so much from this video. Thank you so much!
Thank you for watching. I'm glad it helped!
projectoption it most def did. I have a question will you still be profitable with a straddle even if the price goes down due to bad earnings?
@@danielterrero2822 It depends how much the stock falls. If the stock is at $100 and you buy the 100 straddle for $15, but the stock falls to $90, the straddle will lose money. Generally speaking, the stock price needs to move more than you paid for the straddle. So if you buy a straddle for $50, the stock price needs to move at least $50 away from your strike price to make money. It is a big movement strategy.
projectoption that makes ALOT of sense! You really changed the game for me. I will he paper trading straddles with next weeks earnings calls! Thank you again
@@danielterrero2822 You got it! Keep in mind that most of the time the stock price will NOT exceed the expected move (straddle price in earnings cycle), but there are certain stocks that have a history of moving big. I like to use the strategy on stocks with a lot of hype around them, as they can easily upset / overdeliver. This isn't a strategy I would ever recommend trading for every stock's earnings. You will probably lose money barring a few massive winners.
To follow up on my previous question. Can you close out unfavorable directions in strangle/straddle before expiration or you have close the entire position? Thanks!
Yes you can just close one leg if you want. But remember it will decay fast as its near term & IV crush will happen next day so better to close both. If you think its still bullish/bearish coming days you can roll the benefiting leg to next 60 day long period has less decay, but remember IV let it cool off before buying longer period.
Well I like the video.I think you missed a key assumption: Broker provides Portfolio Margin allowing you to short shares against the straddle.
Very Good though lot to absorb for a beginner. Thanks.
Hi Chris,
Is it possible to use the trick @21:05 to lock in profit after hours while you are short volatility going into earnings?
Such as selling a straddle or strangle or iron condor?
Excellent quality content. Keep'em coming. You are really good. Thanks man.
Love your videos man you're one of the best, respect. I had a suggestion, I can't speak about anyone else but I'd love if you did some videos with advice on how to get out of bad trades. I can't be the only one that runs into some bad options. I sold a covered put $93 when QS was trading almost $110. I've rolled it once down to $85 and it's been difficult to roll out again. This is probably pocket change but it would be great if you had videos dedicated to getting outta jams. Thanks and keep up the amazing work. Respect.
Best dependable trading video and very much understood sir indeed a numerous thank you to Mr Romero pieto who has indeed been behind my weekly profiting in Trading helping me to grow my Knowledge of investing and making me earn more profit through his trading platform.
I never knew how to make consistent profit in the online trading market till I met Mr Romero pieto who helped me out by Trading on my behalf and also giving me a proper guidance in my trading sectors.
His trade execution quality and profiting is well structured with great financial features.
Nice teaching sir.
Mr Romero pieto trades on my behalf due to my tight schedules and he is indeed absolutely doing great, my last investment of $13,000 he gave me my ROI of $47,000 in a period of two weeks of trading isn't that amazing.
Marbel Lopez Am from England 🏴 and am also a newbie in the online market so please how can I get hold of Mr pieto and his trading services ?
On Feb 10 2021 I bought two contracts for FedEx (FDX)for a $300 call that expires March 19 2021( few days after earnings) most advice I get tells me to sell the contract, could you breakdown scenarios on whether it's a good idea to sell the contract or exercise the option?
Wonderfull information bro 👍 thanks a lot!!! Cheers.
You got it!
Hi Chris, great video. Thanks! One question: have you calculated the risk/rewards ratio of buying straddle vs strangle? Personally, I prefer buying strangle which sometimes is more exciting.
Hi ! all your videos are amazing! I would like to know if the value IVx that you see on the top right corner of the options chain , it is the Implied volatility percentile? And it refers to a specific strike of the chain ( maybe the ATM strike) or it is relative to the entire chain, and how isit determined? tks a lot
Now we are talking useful info!
Thanks! I'm' glad it helped.
Hi Chris,
The option explorer you use is only available for Windows users. Do you know any alternative for MacOS users?
Thanks!
Thank you; very helpful!
What do you mean by straddle?
Straddle is an options strategy where you buy a call and put at the same strike price. The strategy makes money if the stock moves big in either direction, and loses money without a big enough movement in either direction.
Great video. Thank you.
If I was really paying attention I could have placed you in MST time zone by your voice because that's just the way we sound out west, neutral as an equal symbol.
You'll never guess where I am from. I've only been in MST for two years!
@@projectfinance Trading stigma suggests NY but you have zero NY accent. Maybe...Kathmandu?
Easy to tell you’re from Chicago, Chris. Nobody in Arizona sounds like you. Why are so many options traders from Chicago? Do school kids take lots of field trips to CBOE? 😉
Immensely helpful! Subscribed. Thank you!
Thanks for the sub!
Thanks
Thanks, Chris. Great stuff and please know that you are the best at what you do.
I appreciate that! Thank you for watching and leaving a nice comment.
@@projectfinance Great Site and I hope you will in due course have more tutorial videos and playbooks on the functionality and USP of IVolLive. Thanks and best wishes .
Super clear
Thank you!
Great video
Can't you lock your profit by simply closing straddle?
Not during after hours trading since the market is closed. You'd have to wait for the next trading day. By then, the stock might have reversed and could be at a worse price compared to where it traded after hours.
How can I scan stocks for earnings 10 days ahead of announcement?
The NASDAQ website has a calendar you can use
Yahoo also
Finviz
Hello, when you short the shares , do you have to exercise your buy call as well ?
No, but you can to close out the position. You can also just close the position on the following trading day when the market opens.
@@projectfinance so basically , when we close the BUY call, the shares we shorted will go away and the position will become flat overall.
The long call which is being held, will it have any intrinsic value left and will shorting shares against buy calls exceed the gains or will be the same ?
So the only risk we mitigate is incase the stock price falls on market open and gains flucatute, we can lock in guranteed profits. Ia that correct ?
@@projectfinance do you any discord or community that we can join ?
So the iron butterfly would be the least expensive strategy to get into this trade for essentially? And still make a 60% gain on margin. That's pretty solid
Yes because it has limited loss potential which significantly reduces the margin requirement relative to selling naked options.
so after practicing a bit on optionNET can you go over to tastyworks and perform these exact trades? just without the graphs on the right hand side?
Yep
Hello Chris! I am a big fan of yours, I have watched all the videos that you have posted on UA-cam the one thing I did not understand is @20.50 shorting -100 shares to lock the profit, you mean selling 1 call option contract or 100 or other? Thanks .
Thanks for your viewership! I meant selling 100 shares of stock in after-hours trading. You need to change your order's "time in force (TIF) to "EXT" to trade shares when the market is closed.
Since I own the call option, I own the right to buy shares at the call's strike price. If I short shares against the long call option, I effectively have locked in the difference between the price of the shares and the strike price of the option. I have essentially bought and sold the shares but I'm still holding a position that represents that.
If I paid less premium for the strategy than the difference in the strike price/stock price, I will have secured a profit by creating a risk-free position from the combination of the positions.
Example: I pay $14.50 for a 100 straddle. The stock goes to $144.50. I short 100 shares of stock at $144.50. I own a call option that allows me buy 100 shares at the call's strike price of $100. I've essentially locked in a $44.50 gain per share ($4,450 on 100) from holding these two positions at their respective entry prices.
But since I paid $14.50 ($1,450) for the straddle initially, my net gain is $3,00.
To unwind this position, I could either exercise the call option which would effectively cover my short stock position, or sell the call option and buy the stock back in the same transaction. I would personally do the latter.
I hope this helps. Please feel free to ask follow-up questions.
-Chris
Chris , thank you so much you’re frist and great mentor on UA-cam that I really like and respect in my life , you are so humble and your teaching strategies are so simple and amazing thank you so much and yes I will definitely sign in on your webpage.🙏🙏🙏🙏
Nice ...
You are amazing bro
Thanks!
Great content !!
Thank you!
So if you have a long call options that’s a year out or so, will it be effect by ivncrush?
If the collapse happens in the long-term options, then yes. Generally speaking, a big decrease in the short-term IV will be met with a significantly smaller decrease in the longer-term IVs. I did a video recently in which I showed the VIX Index falling 60 points and the 2-year IV fell less than 1%. It was mentioned in my "What Are LEAPS" video. I hope this helps!
projectoption thank you! Your videos are awesome to learn from, keep it Up and thank you for answering my question
Hey Chris,
Would it make sense to buy LEAPs straddle for earnings following the optionslam site?
I just subscribed to it and it's nice to see how the straddle prices change but I guess the price that's quoted there is the closing price at the end of market close after release, correct?
Wouldn't the IV crush at the beginning of the day actually eat a chunk of the price movement for near term options? Wouldn't a strategy more like selling straddles in the near term and buying LEAPs straddles actually benefit both ways in that case since the IV crush would be much lesser in the LEAPs and Delta would actually help more for that compared to the near term (10-17 days as you mention)?
What are your thoughts?
They give a straddle price before earnings and after earnings, as well as the stock price movement. The IV crush just means the options experienced a big decrease in extrinsic value because the uncertainties are no longer uncertain in the near-term options cycle (after earnings are released).
Just because there is an IV crush, it doesn't mean an options-selling strategy will make money. The decrease in extrinsic value (the IV crush) could be more than offset by an increase in intrinsic value (a big change in the stock price causing the option to be ITM). Buying a LEAPS straddle would not be impacted much by the one-day change in the stock price, because the long-term options have very small gamma values, which means they won't take on direction (delta) with a small movement in the stock price. The stock price would need to move immensely for a long LEAPS straddle to show moderate gains.
My thoughts on earnings are that it is primarily gambling, as your trade either makes or loses money overnight and there's no way to know exactly what a stock's price will do. But, there are certain stocks that tend to move a lot (outside the EM) for earnings, and these are the types of stocks I'll buy a straddle in, if I'm going to do anything for earnings. Most of the time I do not trade earnings for the aforementioned reasons.
projectoption that’s an interesting outlook indeed but you are right that if the price movement exceeds the volatility crush then you tend to lose. I was just looking at calendar straddles and that made a lot of sense after reading your comment. Perhaps leaps may not work but I guess selling near term and buying far out tends to work well with limited risk and limited profit that way. :) I’ve been successful in trading earnings strangles because of the probability helping a lot in terms of price moves and the iv crush giving in the rest of the profits so far with a much higher probability than straddles. Guess I’ll stick to that and maybe try calendar straddles just to see how it goes. After all, the worst I could lose is what I paid as the difference. :p
What was that website for the historical earnings data?
Optionslam.com
I think it was obvious before opening bell that the market was going to decline by 3% today. Did anyone come out ahead?
Nice
Cant you trade earnings by buying long strangles a week before earnings and selling the day before?
Essentially you would be selling IV
In theory, yes. If you bought the options in the weekly cycle immediately after the earnings report, the options wouldn't experience as much time decay as normal since the stock price catalyst/earnings report keeps the options pumped. You could make money if the stock made a big move either direction while holding the strangle, but it's not guaranteed you'll make money since the options still might decay slightly. Or, the market might reprice the expected earnings move lower and you'd lose money from the deflation in option prices as that lower expected move is priced in. It's not a foolproof or risk-free strategy, but the logic behind it is sound in my opinion.
Nice video! Thanks, I feel inclined to try out iron butterfly. Just a quick note, how would you use calendar spreads to take advantage of increasing iv before earnings ?
You use calendars to take advantage of the vol crush!
you're the shit. thank you
trade risk capitol that i'm happy to lose? Sorry never had any of that.
i simulated SHOP in TOS and it gives me 330$ loss next day. Even if the price went up. Same strikes like Chris i used.
but what was the rate of return? I put in initial capital of $5000 and made over 64%
I tried OPTIONSLAM. .and i just paid for it.. it success and deducted my account but nothing change.. i am not sure, it must be something wrong with OPTIONSLAM.. i paid for NOTHING.. still the web detected me as a free user.. anyone can help? @projectoption
I don't like this guy. After I caught him in that fake story about the -$50,000 loss that was impossible to happen because the stock didn't even have the credit spread width in his story, I knew it was all for views. You talk a good one, but I see through you. Why would you tell people this horrible strategy? At the money straddles? The smart thing to do is to avoid playing earnings and don't be greedy. You can trade after earnings.
Earnings trades are risky. Not worth it
You’re not wrong!
Many thanks, been searching for "options trading strategies for beginners" for a while now, and I think this has helped. Have you heard people talk about - Winoorfa Option Olegroson - (do a search on google ) ? Ive heard some great things about it and my m8 got great success with it.
I would avoid trading earnings and if I had to trade I would just buy a put or a call to reduce my exposure.
Isn’t it bad to purchase a straddle when implied volatility is high ? Wouldn’t IV be high just before earnings ?
no man, IV is always high during earnings. More gain and More loss during earning
Chris, can you please explain your process for exiting your positions?
Hi, I'm absorbing lots of content trying to learn options trading. I wish I could loan you money or somehow mirror your trades as I want to get started quick
Did you BUY the SHOP straddle because it has a history of exceeding the predicted move, and you SOLD the ROKU because it usually does not exceed the predicted move?
Basically, I'm trying to wrap my head around how you decided to BUY one straddle and SELL the other one.
How about Iron Condor? better than straddle or worse for ER? Thanks
I mean sell IC
I prefer IC over straddle, as both the short call and short put can be far away. It is less risky. Straddle may work for some stocks. It depends on the underline asset. Nevertheless home work need to be done, at least to check the last 4 Q to measure the history range.
Hey, Chris! This, as always, is an amazing video! I wish you did the same one with newer data, after COVID and all the rest of the events that happened ever since until now.
Love the way you explain. Awesome, thanks!
Good
What about defining the expected move based on empirical past observations rather than market expectation?
Nice explanation of Long Straddle. But 1 question related to Short Iron Condor just before Earnings results. Considering that IV reaches a peak just before earnings, and then goes down fast after the earnings results, what strategy should we have to make use of this situation ? I think Short Iron Condor would be helpful, because the drop in IV will lead to drop in Vega and hence in option prices, and we can close the transaction by buying back the Iron condor. Would that be OK ?
Do you use Technical Analysis for trading?
chris is the truth. my very first option teacher. i am forever thankful
Interesting that you don't seem to bother including commissions and fees which can have a significant effect on the ROI, especially if hedging by selling stock....
Commissions/fees on shorting 100 shares of stock or buying 100 shares of stock is basically $0 with most major brokerages.
Not sure about straddles. Would like to see data on that. Seems that selling straddle this week and buying next weeks straddle is better bet. Not sure move always matches hype
You're right, it's a toss up
Hi Chris
Either long straddle would work or a short butterfly.
I fail to see how both these strategies could be potentially winners as they are exactly opposite of each other.
Please tell what I am missing here
Thanks
I wasn't suggesting to use them both at the same time. They were two separate examples on two different stocks.
Hey man, great stuff here.
i came across a strange phenomena. ive been trading apple, but ive noticed that it depends almost entirely on the SPX. The SPX seems to be "dragging" Apple in whatever direction its going. this fact seems to be hiding certain signals from the view of the apple stock that can be seen from the view of SPX. how can i avoid this? do i need to shift to trading the indeces?
Hi Chris! Great question here. It's because right now the market is very volatile. Generally speaking, when market volatility increases, stock correlations get closer to 1 (they all move together and become "one"). In lower volatility environments, it's typical to see stock correlations decrease. There is actually an index that tracks index correlations for the S&P 500: www.cboe.com/index/dashboard/kcj#kcj-overview
If you look at the chart you can see that in recent weeks the implied correlation has been increasing.
Great stuff never thought of a expected future price from the straddle
@projectoption / Chris: If you short the stock when the market is closed to “lock in profits”, is there a possibility where it isn’t locked in?
In the example, you kind of mentioned that it’s possible if the stock drops from 580 back to or below the stock price that you originally bought the options at, or the strike price (I’m not sure which), you could lose a lot of money.
Even if it’s theoretically unlikely, it still would be nice to know it is possible. With options trading, you definitely need to be aware of what’s theoretically possible, and especially bad, because it’s just so dangerous if it does happen.
no. If you short the stock at a point where the stock short price - strike price is greater than the straddle entry price, you can't lose. For instance, I buy the 550 straddle for $10 and the stock goes to $580 and I short 100 shares. My short sale price is $580 and the straddle strike is $550. I've locked in a $30 gain but paid $10 for the straddle. I make $20 no matter what.
@@projectfinance when do you close the straddle and short stock position? do I need to wait until expiration? or I will see the gain next morning which I locked in and close all the position , please help
If expect surprise: long straddle & short stock to lock profit
If expect no surprise: short iron butterfly or iron condor
Many thanks, I been tryin to find out about "options trading in the stock market" for a while now, and I think this has helped. Ever heard of - Winoorfa Option Olegroson - (do a google search ) ? Ive heard some super things about it and my mate got great results with it.
if you expect something then how is it a surprise?
It did numbers
Nice
Chyeah
Do you have past performance result of trading earnings announcement to show us?
Thank you for the video, I’m loving your content!
Small note, @19:05, it’s Shopify and not Spotify ... I mess it up every time
You’re absolutely right! I heard that mistake when I was editing the video but I forgot to make a note correcting it. Pretty much the same anyways :D