Earnings Play with Short Strangle on UBER (IPO)
Uber is a no stranger company for many of us before its IPO on May 10 2019. The first day volume was 186 millions share but lowest around 11 millions in the month of May 2019. UBER was going to report its first earning results since IPO on May 30th after market closed.
There was no prior earning data and we were unable to know how market going to react after earnings. There was no IVR (or IV Percentile in ThinkorSwim) data available for us to make decision. The IVR script I set earlier needs one year data on IV to plot first IVR data point. Since UBER was an IPO, there was no IVR data.
The stock price was stable around USD39 to USD42 two weeks before earnings. When looking at options chain, the option premium was high. So there was an opportunity to set wide strike prices using strangle for earnings play on UBER.
Facebook Groups on Options Trading
On top of studying options strategies from books, I also join several Facebook groups discussing options trading. In the groups, there are people that disclose their latest trades, ideas, strategies and even P&L of their trades. Normally there are active participants in each group and I can learn a lot of things from them. Many times I can find new strategies and ideas from the groups. I will try out some of the strategies and see if I can use them in long term.
I do not join a lot of groups, just five with active members.
Earnings Play with Short Strangle
One of my trades is earnings play using Short Strangle strategy with IV Rank.
During the earnings reporting season, there are always uncertainty to the stocks that going to announce their results. Regardless the earnings results - within expectations or surprises - the implied volatility and IVR most likely will go up each day due to uncertainty right before the announcement. What we can do is to
1) scan stocks with high IVR one trading day before the earnings announcement. I usually look for the stock with IVR 70 or above.
2) ensure the IVR crushed dramatically right after announcement in the last few quarters.
3) only select stock with high liquidity.
4) no dividend or the dividend will be given around 20 days or more after earnings so that I have enough time to BTC (buy to close) the strangle.
5) check the historical gap up / gap down. Then setup the width of strangle wide enough to avoid potentially tested and try to get at least USD100 premium from this strategy.
6) close the position right after announcement when IVR crushing down. Ideally getting 30 to 50% from max profit.
Options Strategy - Strangle
A strangle is an options strategy involves a put at a strike price Kp and a call at a strike price Kc, where Kp < S < Kc and S is the stock price.
Both put and call options are at the same expiration.A strangle is an options strategy involves a put at a strike price Kp and a call at a strike price Kc, where Kp < S < Kc and S is the stock price. Both put and call options are at the same expiration.
Tutorial How To Plot IVR (Implied Volatility Rank) On Thinkorswim Chart
I had showed you how to scan for IV Rank using IV Percentile on Thinkorswim platform in the last article. I use the scan to find stocks and ETFs with high IV Rank everyday before market open. I only trade options for stocks and ETFs with high IV Rank, following tastytrade methods.
However, I am not able to tell is the IV Rank for certain stock or ETF trending up or down from the scanning results. It is more useful if we have the visual on the trend of IV Rank in the chart. Tastyworks is not really good for plotting chart as of this time. Luckily I still maintain two platforms and Thinkorswim is just the best way to do that. What I did was to find a IV Rank script and put inside the chart. Here is how I did it.
Trade Options with an Edge by Dr. Russell Richards
Are you interested in a book that provides a very comprehensive coverage of the tastytrade method of trading options? Would you like to have a powerful software package that performs most of the calculations you might need to support your trading? I used to view many videos from TastyTrade website to understand their trading methodology. There are so many videos that I have to view on and off and they are not in very organised manner. I later found a book that is written according to TastyTrade trading methodology. This book is my best reference whenever I want to trade options.
Check out this book, Trade Options with an Edge from Dr. Russell Richards. It is available in E-book form, softcopy and hardcopy at Amazon.com. The software comes with the book. If you have Excel you can run the software. It includes the Black-Scholes option pricing model, greeks, evaluation metrics for new positions, management of existing positions, pairs trading, calendars/diagonals, risk profiles, IV estimation, BPR determination, futures, exploration of P&L response surface, lists of ETFs, tax estimation, and much more. The book pulls together in one place most of what tastytrade advocates.
Tutorial How To Scan IVR (Implied Volatility Rank) On Thinkorswim Platform
One of the key options trading strategies for TastyTrade is utilizing IVR (Implied Votality Rank). You can find so many videos related to IVR discussion at TastyTrade website. If you have Dough.com account (you are not able to register as new user now after they release TastyWorks platform) or already in TastyWorks platform, you will be able to find stocks with IVR indicator at the "Grid" page. I used to rely on stocks listed at Grid page to set my options strategy. However, the number of stocks listed in Grid page is very limited. So I need to find a way to "Scan" IVR for all stocks and ETFs but I am not able to do so from TastyWorks platform.
If you google IVR related keywords, you can find many articles talked about IRV and IV Percentile. In fact, Thinkorswim and TastyTrade are using these two terms differently.
Tutorial how to fund your TD Ameritrade account
In this article, I will provide an example how you can transfer fund to your new TD Ameritrade account via wire transfer from overseas to US. Beware that the information is accurate at the time of writing of this article. You should always refer to the information provided to you by TD Ameritrade before actual fund transfer.
You can wire your money via Citibank or CIMB Bank if you are located in Malaysia.
Please be aware that your fund transfer may be rejected even it is a small error in your form. The fund returned to you will be lesser than you sent initially after currency conversion both ways as well as processing charges from both US and your bank. So always double check your information before transfer your money.