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