Paul Meyer Buys Houses

50/50% earnings report scenario – The great idea continues – Update

Well guys it seems I have a bit of depressing news on my research and option practice plays on my 50/50% earnings report scenario play…Out of 5 earnings report only 1 worked to receive a +27% gain in 1 day, which was Wells Fargo earnings. Even on my higher priced stocks around $50 the movement wasn’t anymore then 2-3% so the options BOTH went down interesting enough if the stock moved up or down, which doesn’t make any sense to me. I bought next months options (Feb 2007). If I don’t buy far out of the money then I’d have to have a large movement in the option to just break even where as out of the money possibly with a higher priced stock the movement could be a bit more volatile moving the option faster. So far in my practice plays I haven’t see a profitable trade to my liking.

I really belive this type of trade can work. I just need to fine tune it. Apple Computer’s earnings is tomorrow and I know with all the excitement behind it will either pop high and go higher or tank. What I did learn from my practice plays is that it has to be modified in the direction you want it to work. So if I think AAPL @ $97 will go higher after earnings then I should buy a higher pecentage of Call options and a lower amount of Put options for the insurance just in case I’m wrong. So this is exactly what I did going into earnings 75/25%.
If I’m wrong I feel it was a profitable chance worth taking. I feel even if I only make at least +$300 its profitable. Today after hours I’ll see what happens with AAPL.

As for now the 50/50% play hasn’t worked like I dreamed it would. I suppose every trader would of been doing it. I am going to keep doing my research practicing this play in my log book for every name bran company name until earnings season is over to see if I can fine tune it down to make it work or at least see how my options change before and after earnings.

cheers – fn

2 responses

  1. I bought 500 AAPL shares just before the earnings release and sold in the next half hour or so. Made $1100…. how did your trade go? It was very scary when AAPL trade was halted just after I bought… Problem with options on stocks is you can’t trade after hours. I bought one GOOG 550 call just before GOOG earnings and lost most of its value instantly.

    February 4, 2007 at 4:36 am

  2. Hi moom,
    To respond to your comment I ended making 50% on my call options $2000 off my initial $4000 investment, but it was not a good trade because I should of sold my Jan 07 100 Calls right after I bought them in end of Nov and rebought them right before the Mac Expo. Now, I didn’t go through AAPL earnings. I sold way before. I learned my lesson from Garmin (GRMN). As for your GOOG call play I say that was your learning trade and not to do it again. I also thought AAPL would of went at least 10% higher right after earnings and it didn’t and thats why I’m not playing any Puts or Calls through any earnings anymore. The smart thing would of been to play the day after GOOG earnings then play Puts on it and you would of made some money or play Puts on AAPL after its earnings (I did and made another $2000). Well keep trading and practicing and you’ll do better on your option trades I know if I don’t get better I’ll be out of the game.

    February 4, 2007 at 11:39 am

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