Q1 Earnings

Played
4/20
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

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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

AMZN Earnings – What the market is showing

Closing price = 185.42
Expected move = +/- 10.888
ATM Straddle = 11.28

High open interest at the 190 and 170 strikes shows a downward bias.

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).

AA Earnings Play

Position Entered on 3/30/11

Reported earnings (4/11/11):

 

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

ROVI Earnings Play

[Click images to view full size]

Current Trades:

Current Payout:
Strategy:
February premium ATM calls are trading at over 80% volatility so 1 FEB 65 CALL and 1 FEB 70 CALL were shorted into earnings to collect premium against the long MAR 65 CALL bought on 1/28/11. In the event that ROVI misses earnings and the stock drops below 65 until Friday expiration then premium of 2.15 is collected lowering the risk of the MAR 65 CALL from 4.80 to 2.65 (2.40 * 2 = 4.80; 4.80 – [1.40 + 0.75]).

The MAR 75 CALL was bought today for two reasons:

  1. Unlimited upside potential in the event of higher than expected reported earnings
  2. Gives me more flexibility in the future if I want to put ROVI gains into a neutral spread (if the price of the 75 CALL drops then I can add one for cheaper to lower the basis and leg into the spread when price recovers; if price goes up then the deltas in the 70 strike will increase faster than the 75s so I can short 4 70s to offset the 75 CALL to spread the position; or at that point I could sell 1 65, and 2 70s for a spread)

Goal:
Lock in profit with potential for further gains.

Deltas for 70 and 75 MAR CALLS are .33 and .16 respectively when ROVI trades at 65.40. If a butterfly spread is legged on at 66.50 the premium will be approximately 2.00 and 0.90 respectively for the 70 and 75 CALLS. The benefits of this are as follows:

  • It would free up capital of $710 for other trades
  • The butterfly is on for a credit so the maximum risk of loss is a gain of $165 (if the stock closes at 65 > close > 75)
  • The maximum profit potential is $1,165 (if the stock closes at 70)

Anticipated Payout: