Q1 Earnings

AAPL – vert + 2 butterflys
4/25 NFLX – diag + vert + 2 butterflys
4/26 AMZN – diag + vert + 2 butterflys
4/27 BIDU – IC + 2 butterflys
4/28 MSFT – 2 calendars + IC

Other Earnings
4/26 DAL
4/29b CAT

BIDU Earnings Play (Ranges)

Closing price (4/27/11) = 151.11
ATM Straddle =  10.8
Expected move = +/- 10.05

Composite of the two:

AMZN Earnings Play (Ranges)

AMZN closing price (4/26/11) = 182.30
Expected move = 10.4
ATM Strangle = 8.6

NFLX Earnings Play (Ranges)

Expected move priced into the market of 21. Position is ITM for a move of +/- 47 with explosive upside on the boundaries.

AAPL Earnings Play

AAPL [Chart]
MMM @ +/- 14.15
Currently trading @ 330
MMM Range: 316 – 344
Entered 2 positions:

  1. Weekly Butterfly – ITM between 315.43 and 324.56 (max return – 1000% @ 320)
  2. Short PUT Vert – ITM above 332.85 (max return – 43%)
Update: Added 2nd weekly butterfly to cover the range 325.83 – 334.20 for extra insurance after the overnight gap up (area between double-dashed red lines is uncovered).

Disassembling an Options Position (AXP)

This is an example of a trade that will take 1-2 months to mature. I began building a position in AXP (with downside bias) on 3/31/11 and it started reversing sharply upward on 4/5 [chart]. By developing a strategy and updating it as circumstances changed, the basis of the underlying MAY short position was lowered and risk was hedged away with an emphasis on efficient use of capital. The overall position in American Express Co. is now positive even though it moved in the opposite direction from what was originally anticipated.

Adjustment Phase (4/5-4/11): [Hedge, leverage, and pull out profit by reconfiguring spreads]
The goal of the entry process was to build a position by layering high probability spreads on top of each other which created an inventory of  goods for sale that could be reconfigured to create something valuable. An emphasis on keeping both risk and capital requirements minimal was prioritized at each level of the trade.

The current inventory of the position can be reconfigured various ways but the simplest way to present it is integrated to stock simultaneously short 300 shares and long 200 shares with a reduced basis in the long MAY PUT. The speculative position is the Long MAY PUT and the rest is the “inventory.” The inventory is hedged against itself elegantly; MAY long synthetic stock vs MAY short synthetic stock and APR short synthetic stock vs the APR 48 CALL. The APR 48 CALL was bought for 0.06 and reduced capital requirements by $600. Deltas are beta weighted to SPY.

The position as of 4/12/11 is composed of the following derivatives:







The trade history for the position is located in the adjustment phase link above and includes detail on how the spreads were taken apart and recombined.

Entry/Setting Up Phase (3/31-4/5):
(3/31) [Start position that takes advantage of time and downward movement]
Enter a diagonal with an embedded long PUT vertical to take advantage of a move down. After Friday expiration the short PUT expires worthless and the basis of the long MAY 11 PUT is reduced by 0.54 to 1.58 (25% reduction in basis of PUT) which moves the break even point up, lowers the risk of the position, and frees up capital.

(4/1): [Reduce basis in PUT and reduce riskPosition (as of 4/1/11)
Sell an out-of-the-money weekly PUT vertical. Since there is an embedded long PUT vertical in the diagonal then I could sell a PUT vertical against it to collect .07 which lowered the basis of the MAY PUT and the risk of the position while freeing up more capital.

(4/4): [Start building a position with high probability spreads]
Sell an April CALL Vertical and a May Iron Condor. Up to this point AXP had been moving with me so I felt confident adding a similar position for April and May expiration.

(4/5) Buy back weekly vertical on short-term play [Next time look for more premium to cover commissions]

P/L on AXP position (4/12)

AA Earnings Play

Position Entered on 3/30/11

Reported earnings (4/11/11):


Risk Profile on position with MMM @ +/- 0.92:

Portfolio As of 4/1/11

Portfolio is updated on the site monthly. For current portfolio holdings accurate as of 4/1/11 click HERE.

LVS Spread – Opened 3/24







USD/JPY – Stagnant Overnight Forex

Short at 80.91
1st Buy stop set at 80.86 (+0.05)
2nd Buy stop set at 80.80

The 2nd buy stop will be my long position going into tomorrow.