Earnings Play with Short Strangle on LYFT

Published on 18 August 2019 Hits: 80 Posted in Strangle.

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.

LYFT Earnings

1) Earning will be announced on Aug 7th after market closed. So I STO a strangle during market hours.

2) Since there was no IVR data available, I just manually looked at IV data. The IV was at highest point at 0.78 on Aug 7th. This confirmed that we have a chance for earnings play.

3) The premium of LYFT was high too so we can set wide strike prices on strangle. Here's the setup:

STO Sep 20 2019 CALL 75.00 @ 1.12

STO Sep 20 2019 PUT 45.00 @ 1.10

Premium received was USD222.00 for a USD30 wide strangle.

4) After earnings was reported, IV dropped to 0.52 and price closed at slightly higher than previous day. Now I have 50% of profit already.

5) I should closed the strangle for a profit but I want to wait for IV to going down further since it was a very wide strangle and I expect price will go down further due to large volume on Aug 8th.

6) The price went down further on Aug 9th and I want to close the strangle at USD50. At the end I was happy to close at USD60 to free up my capital.

LYFT Tastyworks