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Found 1 result

  1. Couple of weeks ago, the CML published an article The Volatility Option Trade After Earnings in PayPal Holdings Inc. The setup was: "The week following PayPal Holdings Inc (NASDAQ:PYPL) has had one fairly consistent pattern -- volatility. If we take a myopic view after looking at the last three-years and focus on the last six-months, that pattern is yet more decisive. Irrespective of whether the earnings move was large or small, if we tested waiting one-day after earnings and then holding a long out of the money (40 delta) strangle for one-week (using two-week options), the results were quite strong. This trade opens one-day after earnings were announced to try to find a stock that moves a lot after the earnings announcement." If we bought the out-of-the-money strangle in PayPal Holdings Inc (NASDAQ:PYPL) over the last three-years but only held it after earnings we get these results: PYPL Long out-of-the-money strangle % Wins: 64% Wins: 7 Losses: 4 % Return: 174% Tap Here to See the Back-test The backtest also defines very clear rules for the trade: * Open the long out-of-the-money (40 delta) strangle one-calendar day after earnings. * Close the strangle 7 calendar days after earnings. * Use the options closest to 14 days from expiration (but more than 7 days). On July 25, I posted the link to the PYPL potential trade on the forum: On the next day I posted my entry: Please note that this trade didn't make it into the official model portfolio due to higher potential risk - hence I mentioned "small allocation only". The next day, some of the members started posting their exit prices: I was out a day later for 27% gain: Some members did even better: And finally an interesting comment from another member: Those are real trades, from real traders, posted in real time. Attention tastytrade: Buying premium does work - you just need to know how to do it. This is how people profit from the option market. It's not guessing or speculation. Take a reasonable idea or hypothesis, use a rationale system to help overcome cognitive biases, and test it. Tap the link below to learn more: Tap Here to See the Tools at Work When you combine the best options trading community with the best backtester, the results are unbeatable. Related articles: Lessons From Facebook Earnings Disaster The Incredible Option Trade In VXX Post Earnings Option Trade In Facebook Why We Sell Our Straddles Before Earnings Earnings Momentum Trading In Google