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Post Earnings Option Trade in Facebook


For Facebook Inc (NASDAQ:FB), if we waited one-day, and then sold an one-week at out of the money iron condor (using weekly options), the results were quite strong. This post earnings options strategy opens two calendar after earnings to try to let the stock find equilibrium after the earnings announcement.

Facebook Inc (NASDAQ:FB) Earnings 

We can test this approach without directional bias with a custom option back-test. Here is our earnings set-up: 

 

setup_2_7_after_custom_e.PNG



Rules 
* Open an iron condor two calendar days after earnings 
* Close the iron condor 7 calendar days after earnings 
* Use the options closest to 7 days from expiration (but at least 7-days). 

And a note before we see the results: This is a straight down the middle volatility bet -- this trade wins if the stock doesn't move much during the week following earnings and it will stand to lose if the stock is volatile. 

RESULTS 
If we sold this 40/20 delta iron condor in Facebook Inc (NASDAQ:FB) over the last three-years but only held it after earnings we get these results: 

 

FB: Short
40 Delta / 20 Delta 
Iron Condor
 
% Wins: 67%
 
Wins: 8   Losses: 4
 
% Return:  49.5% 


We see a 49.5% return, testing this over the last 12 earnings dates in Facebook Inc. That's a total of just 60 days (5 days for each earnings date, over 12 earnings dates). 

We can also see that this strategy hasn't been a winner all the time, rather it has won 8 times and lost 4 times, for a 67% win-rate. 

Setting Expectations 
While this strategy had an overall return of 49.5%, the trade details keep us in bounds with expectations: 
       The average percent return per trade was 7.78% over 5-days. 

WHAT HAPPENED 
This is how people profit from the option market -- it's not about guessing. 

We hope, if nothing else, you have learned the intelligence and methodology of trading Facebook options and this idea of equilibrium right after earnings.


To see how to find the best strategy for any stock we welcome you to watch this quick demonstration video: 

Tap Here to See the Tools at Work 

Risk Disclosure 
You should read the Characteristics and Risks of Standardized Options. 

We incorporated this strategy into our SteadyOptions model portfolio with good results so far. This is how SteadyOptions members take advantage of the CMLviz Trade Machine.

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