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.
1) UBER going to announce earning results on Aug 9 2019 after market. IV was high enoughat 58% but not as high as previous earnings play. Premium was more than USD100 with reasonable strike prices. Again, no one year IVR for IPO such as UBER, so I used IV.
STO SEP 20 2019 CALL 49 @ 0.90
STO SEP 20 2019 PUT 35 @ 0.65
Premium received was USD155.00 for a USD14 wide strangle.
2) After earning results released, stock price continued to move down until the PUT was tested. A small rebound on stock price from Aug 16 to 21. However, price went down again on Aug 22. On that day,
BTC SEP 20 2019 CALL 49 @ 0.02.
3) At the same time, roll down and roll out the tested PUT side for a USD10 credit.
BTC SEP 20 2019 PUT 35 @ 2.15
STO OCT 18 2019 PUT 34 @ 2.25
4) However, the stock price continue to move down. Slight rebound for a while until MA5 cut below MA20 with bearish candle on Sep 24. Down trend confirmed. I did not want to continue in this position. So close position and took loses of USD137 for this AUG play.
BTC OCT 18 2019 PUT 34 @ 2.95.
5) UBER going to announce earning results on Nov 5 2019 after market. IV was high at 83%. Premium was more than USD100 with reasonable strike prices.
STO DEC 20 2019 CALL 36 @ 1.00
STO DEC 20 2019 PUT 25 @ 1.05
Premium received was USD205.00 for a USD11 wide strangle.
6) After earning results released, stock price continued to move down but the PUT was not tested. Price went side way from Nov 7 to Nov 12. At that time, the untested CALL price had gone down to USD5. So I closed the CALL position.
BTC DEC 20 2019 CALL 36 @ 0.05
7) On Nov 20, stock price closed above the lower gap and moved up. Stock price continue tried to break upper gap but unsuccessful. At that time, the remaining PUT price had gone down to USD10. So I closed the PUT.
BTC DEC 20 2019 PUT 25 @ 0.10
Total profit for Nov earning play was USD190.00
Looking back, rolling down untested CALL to 30 delta might be a right thing to do in both cases, just like the earnings play in May. This might reduce losses for Aug play. Will try this next round.
Read more...