Just like any options strategies, earnings play with short strangle based on IVR is not without risk. The stock price could gap up or down after earning results. One of the legs in strangle might be tested if the stock price continue in that direction. Another leg will be untested and very cheap to BTO. However, this is the stage we need to defend our position to minimize overall loses, or if lucky, get out the position either break even or small scratches. After the initial Earnings Play with Short Strangle on UBER (IPO) in May in 2019, my subsequent earnings play in Aug and Nov 2019 were not as good as the first one. Lessons learned and will be applied to my next earnings play.
LYFT was first traded in March 2019 with 37 million transactions on the first day. The company reported first earnings since IPO on May 7th after market. However, I missed the earnings play at that time. The reason was the IV (no IVR yet for LYFT) for this stock was lower then period April 10th to April 16th. The stock went sideways after mid June and before second earnings report. On Aug 7th, the IV was as high as April 10th to April 16th. LYFT was going to report earnings on that day after market.
Just like UBER earning play, the 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.
The stock price went sideways between USD58 and 68. When looking at options chain, the option premium was very high. So there was an opportunity to set wide strike prices using strangle for earnings play on LYFT.
If you have an account with TD Ameritrade Singapore, you might have received email from them asking you to update IRS Form W-8BEN, both you and co-owner (if you have) of the account.
If TD Ameritrade Singapore does not receive updated info by December 6, 2019, your account will be subject to trading restrictions and U.S. federal backup withholding. Your account will be restricted to closing transactions only, and you will not be able to open new positions. In addition, TD will convert your Foreign account to a U.S. Taxpayer account after the end of this year. TD's clearing firm will also be required by the U.S. Internal Revenue Service (IRS) to withhold 24% of all interest, dividends, proceeds from options transactions, and sales proceeds until they receive the necessary documentation.
Here, I put up a sample W-8BEN and how to fill up this form.
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.
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.
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.
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.
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.