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What drew me to this site was Kim professing to apply strategies or trading philosophies as set out in Jeff Augen's books. Besides many things posted on here he also devoted some chapters to stock pinning, i.e. on expiration some stocks tend to gravitate towards a particular strike price. AAPL was and is an example of a stock that often pins to a strike. Jeff did his research on 3rd Friday expiries but I thought to test his theory today for a bit of fun. The actual pinning effect is something I verified by charting minute by minute quotes for AAPL over two years. You get charts like these: Here you see the stock quote from March last year with the Y axis showing how far ($) away from the closest option strike the stock was and the X axis the number of minutes since trading started that day. This plunging chart is very frequent with AAPL as - from the stocks I was able to acquire minute by minute data from - it is the stock that most consistently shows this behaviour - it only failed twice in two years roughly (based on 3rd Friday expiries). Anyway I could never make use of this with my European broker because profits are small and trading is frequent - with minimum 36$ to open and close a position this wasnt feasible. Now I switched to a US broker this became a possibility. So for fun I tried this today on a non 3rd Friday expiry and I can say AAPL duly obliged: I picked up the trading at 11.40 AM EST - you can start earlier but this is usually a midday lull that creates a stable time to open your position. The strategy is to use ratio trades to make profits on low capital investment. The stock was around 208.40$ and in line with the strategy we guessed that 207.50$ mark would be the close hence OB 1 C 205 @ 3.34$ and OS 4 C 202.50 @ 0.93$ for a net credit. The stock duly obliged and tumbled; in fact below 207.50$ to 206.80$ or so by which time I closed the trade. Now we retained the theory that at close it would be 207.50 so this time we did a different ratio and sold the 2 C 202.50 @ 4.55$ and bought 4 C 205 @ 2.03 again for a net credit. AAPL proved particularly tractable and by 4.20 PM EST it was trading around 207.85$ so we closed. The 0.40$ credit on the 207.50$ calls beckoned again. Therefore we repeated the setup of the morning except this time of course the trade was a net debit. I watched smugly as AAPL duly converged back down to the strike price - with 9 minutes till session close I was reckoning to close at the last minute. Except... my internet went down at that moment with 4 ITM shorts! Slight panic - router reboot and thank goodness Internet worked again (ouf!) I closed out immediately just in case another gremlin would be thrown up. In doing so I gave up a little profit as AAPL closed at 207.53 $ like a champ of pinning. Profit from all this excitement: $ 362 after commissions - the capital outlay was never more than 2K (but this is a slight cheat because I have an AAPL long position in my portfolio) - anyway 18% in the day and a good bit of fun with a slightly unpleasant bit of excitement toward the end!

@SirionThanks, but I actually like that the topic contains some trading ideas as well. It shows potential members the depth of our discussions and the strength of our community.

@Hielke Pre-earnings momentum trade. The basic thesis is that leading up to earnings, some stocks tend to have positive momentum regularly. It's a directional, high-risk, relatively short term trade. I'm laying this out because I think many people that were looking at these trades gave up during Q1 of this year, because oh man it was rough. Very small position sizing. Cap the number of trades you run at any given time. If you run this with other bullish strategies (short vol in particular), be even more careful and consider hedging your portfolio. Some stocks that I trade with this will flat out ignore market drops during their pre-earnings phase. Others will not. While many trades are closed at -40% (a widely used rule of thumb is a profit target of +40%, loss limit 40%), I have had 100% loss trades. A stock I did this a couple of weeks ago with had an accounting scandal, dropped 15+% during the day, and rendered the options basically worthless. The only trades were small lots of minimum pricing, I assume traders closing positions for cleanliness/margin reasons. I actually let that one ride through earnings, thinking the commission fees weren't worth trying to close out the dirt, and the company had crushed earnings before - no luck. Anyway, I personally think there's a definite edge here but you have to be careful both in terms of individual position sizing and overall portfolio effect. I'm actually very behind with some of my logging, so I can't even give you my personal profitable trade rate, or the average gain using this strategy. I may even have lost money on it this year, considering how badly Q1 went. This quarter has treated me much better. Some people have looked at an inverse of this trade - negative pre-earnings momentum, in an effort to balance some of the portfolio effects. The return scanner even lists put returns. (also, you can find some non-official straddle opportunities that don't meet SO criteria but may outperform their cost for whatever reason (RV drop might be too high, IV might be out of range, etc.) I don't think there are enough put candidates to justify the effort searching for them, so I haven't really pursued that myself. If someone has been successfully utilizing those trades (as a balance or on their own), I'd be happy to discuss some elements of strategy with them. I think it's not an SO official trade largely due to the directional nature and volatility, though I might be putting words in Kim's mouth.

I almost submitted a post answering this before realizing we're in the public forum. I'll update a post in the "CML Trade Ideas" category and tag you. @Kim Not going to dig back through this whole thread myself, but there may be more trade information in this thread than you'd like. You may want to copy this thread into one of the private forums (while leaving a "public" thread as well for less sensitive feedback / updates). Not really my concern, just a thought

I think it would be nice to have the non-earnings (base) IV at the fingertips, right on the straddle/calendar RV chart, in the upper-left corner, for example.