The most exciting escapade of the year is coming up —earnings season! This is the time where companies jump into the confessional and tell us results and outlook, while traders/investors look on with delight and horror following the news.
PLAY THE BIG MOVES
If you are like me and enjoy playing for the big moves, then using options are the best way to do it. Keep in mind that trading is not a game of perfect, you’ll have some losses along the way but hopefully the big winners will carry those. I will use charts/technicals to give me the edge I need to enter a trade regardless of the news. Options define your risk when you are a buyer or spread trader, you can only lose what you put into the trade.
BE READY ON BOTH SIDES
The surprises can move stocks in both directions, sometimes it pays to play it both ways. For instance, we put on a trade Wednesday on Research in Motion (BBRY), which surprised to the upside and gained in March. I wasn’t so sure that would be the case this time around so we strangled it, bought a July 16 call AND July 14 put for 1.63, the volatility was low so the market was not expecting a huge move. Earnings news this morning has the stock being crushed under 11 (so far), the 16 call will be vaporized while the 14 put will have a value of 3 or so.
Going long (calls or puts) may be great in certain instances but even better is playing for a big volatility move.
Disclosure long BBRY 16/14 July strangle
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