Option Tribe Webinar 12/8/15: The Use of Multiple Time Frame Weekly Options around Earnings

[luxmon]

I sometimes catch the free weekly Option Tribe webinars that occur on Tuesdays at 5PM ET.  This one looks interesting to SO members who trade earnings:

 

 

 

SMBU's Options Tribe Webinar: 

SMBU’s Derek Vanderpool: The Use of Multiple Time Frame Weekly Options around Earnings

 

 

December 8, 2015

 

Most weekly options strategies do not maximize capital potential due to the risky nature of trading within 7 days of expiration. Derek Vanderpool returns to the Options Tribe to present the system that he has developed  which minimizes risk by using multiple time frames and several other edges that are available when using weekly options correctly.

 

I'll see you tomorrow at 5:00pm ET. 

Seth Freudberg

SMB Team

 

[Edwin]

Thanks, is there a link to register for the webinar?  Will the recording be posted if I can't join live?

[luxmon]

http://www.smbtraining.com/blog/join-options-tribe

 

Choose the Basic membership and they'll send you an email every Monday with the current week's topic.  You must watch live with the free membership. 

Edited December 8, 2015 by luxmon

[Edwin]

Thanks

[luxmon]

Ironically I missed the webinar as something came up at work.  Hopefully someone caught it and might be able to list the takeaways.  The title makes me think of the earnings calendars we do very successfully here.

[Edwin]

I only caught a part of the webinar, they started late because of technical difficulties.

I was only able to catch the first trade example.  It was a NFLX put diagonal.  It wasn't clear as to why the presenter picked the strategy and didn't clearly explain the background of the trade.  There were a lot of questions on the chat about why he picked a diagonal instead of a calendar, and what underlyings he uses this type of trade on or what his methodology of analysis he used to come up with the trade idea.  And the questions seemed to be left unanswered.  I honestly was pretty unimpressed, the presenter was not a good speaker and did not do a good job communicating to the audience.  It was basically a presentation on an example of a profitable trade where he held the diagonal until the short leg expired worthless.  He didn't talk about what he would have done if NFLX had gone up and how he would have managed the trade if the underlying started go against him.

I'm pretty sure it wasn't an earnings related trade, the example was a short a December weekly put, and long a January closer to the money put for a debit.

If anyone else was on, maybe they can add to what I caught.  

[luxmon]

Edwin, thank you for the reply.  That's too bad, the last few ones I've caught from them have ALL started late and had technical difficulties.  Last week's the host would be trying to speak to the guest and the guest couldn't hear him, having to disconnect/reconnect, etc, throughout the whole meeting.  Seems pretty basic in this day and age to have those things ironed out ahead of time.

 

I have noticed also some of their webinars have been glorified sales pitches from people that work for SMB.  It sounded like this guy was too - caveat emptor.  That being said, they have had independent presenters that have been really good and worth the time.

 

Thanks again for the summary.

[Kim]

I didn't watch the webinar. However, "minimizes risk by using multiple time frames and several other edges that are available when using weekly options correctly." sounds very misleading. "using multiple time frames" is nothing more than some kind of calendar or diagonal. Being short weekly options still has huge negative gamma and does NOT minimize risk.

 

Edwin, do you remember the exact setup of NFLX trade?

[Edwin]

I don't remember the exact strikes, it was something like Long Jan 125.71 Puts, short December (1) Weekly 120 puts.  I didn't see how much of a debit he paid.

[Kim]

And the stock was near the short 120 strike?

[Edwin]

I don't recall, NFLX was trading between 125-130 last week.

[Edwin]

I'm surprised they wouldn't consider posting the recordings on YouTube.  If you can watch live for free, what's the difference?  They would be able to reach more people that can't watch live.

[Guest Peter]

Hi Kim

here the data for the NFLX example

it was an diagonal: Entry was Oct 15. 2015 one houer after opening

sell -30 Oct (1) 100 Put

buy +30  Jan (92) 95 Put

Oct. 14. was EA after close. Stock price after EA about was 100 

it is an post EA trade

[Edwin]

Hi Kim

here the data for the NFLX example

it was an diagonal: Entry was Oct 15. 2015 one houer after opening

sell -30 Oct (1) 100 Put

buy +30  Jan (92) 95 Put

Oct. 14. was EA after close. Stock price after EA about was 100 

it is an post EA trade

Thanks, I was obviously not paying attention.  

[Guest Peter]

I've done with this strategy two backtests. For AAPL and CIEN. booth Oct 2015. The results were also positive. What do you think about the Strtegie?

[Guest Peter]

Edwin.

It was almost impossible to follow the Webinar. That's why I stopped it annoyed them by half. If I had not made a bunch of screen shots, it would have been impossible to find out these details. So, it was not up to you, but in the presentation.

[Edwin]

 

Edwin.

It was almost impossible to follow the Webinar. That's why I stopped it annoyed them by half. If I had not made a bunch of screen shots, it would have been impossible to find out these details. So, it was not up to you, but in the presentation.

 

I was annoyed by the arguing/questions in the chat window.

[Kim]

Interesting.

 

Generally speaking, I don't like trades with shorts expiring only one day to expiration. The gamma risk is still too high. In this case, the stock stayed relatively close to 100 strike, which made the trade a winner.

 

Did he explain why he went with 95 as long strike? He is selling lower strike so it requires $500 in margin, plus the debit. Looks to me that going with simple calendar (100 strikes both long and short) would provide better risk/reward.

[Edwin]

Peter can answer better than I, but most of the questions from the chat window in the Webinar was why he selected those strikes, and why he did a diagonal instead of a calendar.  I didn't see answers to those questions.

[Guest Peter]

It is a day trading strategy basically. Within a few hours, or a maximum of two to three days you can make 5-10% profit. The idea is that the day after the EA and about an hour after the opening of the stock market price has calmed . The Theta and the negative Gamm is gigantic. If the price moves no longer strong, then quickly creates a nice profit (about 5-10%).

[Kim]

Well, if you open on Thursday like NFLX, all you have is a one day. And it's true that if the stock doesn't move after the initial move, you will make 5-10%. But negative gamma works against you and if the stock does move, the trader will be a loser.

[Kim]

I've done with this strategy two backtests. For AAPL and CIEN. booth Oct 2015. The results were also positive. What do you think about the Strtegie?

Which setup have you used for AAPL?

[Guest Peter]

Kim I have send sreen shoots I have made via email.

 

for AAPL EA Oct 27.2015 AC

 

Sell -10 Oct (2) 117 Put

Buy +10 Jan (79) 115 Put

@ 3.26 Debit

Entry was Oct. 28 one hour after open, Stock price $166,65

cost $3250, Margin $5.2200

[Kim]

I need to do some more backtesting, but the idea actually looks very interesting. They are selling short options that still have some premium left after earnings (even after IV collapse). The long options have 2-3 months to expiration, and in some cases they catch next earnings. He is buying strike slightly below ATM which seems to work pretty well. The short strike can be rolled week after week, creating more income. I think it has potential.