the bullish RIMM trade got spanked hard. RIMM disappointed and the market punished the stock. Therefore any bullish options strategy such as the one I suggested got hammered. Personally I think to repair the strategy is only to take on more risk than I am willing to do. But if anyone is interested in increasing their risk, I would look at selling the long contracts, holding the shorts, and possibly reversing bias further by purchasing a bearish vertical put spread. About face! but again to repeat my own sentiments. I will chalk it up to experience and take the small loss by closing the trade and walking away.
good trading
Marko
RIMM earnings is coming up soon and some might think it’s a flip of the coin which way it will go. But with just a little research at www.OptionSlam.com you can get a certain edge and confidence in your trading decisions. In the screen shot posted here you will discover that RIMM has gapped up 6 out of the last 10 earnings. (that’s pretty good odds) Both previous April Earnings were gainers. (nice timing cycle) Each of those 6 times RIMM held the one day gap gains through into the end of the April Options Expiration cycle. Four of those 6 times it increased the one day gap gain into the option ex. Date.
With these seemingly bullish implications a trader might consider a vertical spread that has a nice risk reward ratio. In the example below you risk $156.00 to make $344.00 . That’s better than a 1:2 ROI ! Furthermore RIMM only needs to go up 4% to get to your break even point.
well I have made another adjustment to this trade. The opening trade and first adjustment are viewable a few posts down… just scroll down to see . What I did today was to sell the 115/117 april call spread for .73 This move nets me a position you could call a BWC (Broken Wing Condor) for a net credit of 1.03. So there is no risk of loss in this trade but if the market continues to go up and up and up I could end up with only $3.00 profit. Anyways…see the risk graph attached here. That tells the story.
I entered two different strategies on PCLN this past week in anticipation of their Earnings Release.
I entered one conventional long straddle which cost $17.00
as you know the IV crush upon ER can devastate this strategy, so I also entered some short calendars which also like a large move but have some benefits in the way of IV crush. I entered 3 calendars so the max risk became comparable to the one straddle.
As you can see both strategies profited nicely.