The earnings trade in Visa

One of the frequent trade types that I do is a earnings trade. This is a catalyst trade meaning that an upcoming event is a real catalyst for price – so a nice move is expected. This move can obviously be down OR up so that trade design is where the focus is for me.

The $V earnings were scheduled for after hours on Wednesday, October 31, and I was interested in considering a pre-earnings trade. Here is the trade I ultimately decided on:

Here is the breakdown:

  • I am long the November 2 weekly 140/145 Call Spread
  • I am short the November 130 Put (normal monthly)
  • This trade was done for a $.06 debit

Here is where price is trading at the moment:

Since the call spread expires tomorrow, the plan is to get value of it today once I feel that is has stalled. I will leave the short November Put for now (has a bid/ask of .21/.25 at the moment, gets under a dime and I close it).

Update: As of 9 am CST, I have sold the November 2w 140 Call for $2.42 leaving these pieces:

  • Short November 2w 145 Call
  • Short November 130 Put
  • This is now considered a typical strangle, and I am short both pieces so it is a short diagonal strangle. The Call expires on Friday, tomorrow.

 

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