A post-earnings trade review

One of the key elements to doing an Earnings trade is creating a plan for the exit. To illustrate how I go about this I bring you 2 trades that I put on for today: $QCOM & $SCTY. I will take a look at each one and note what the next step is.

Here is $SCTY:

SCTY_Earnings_trade

The goal of this trade is simple: sell elevated premium and create a w i d e range for price to move in — and stay in by expiration (Friday). So far price has been wild but currently trades flat in after hours. If this holds I will need to do nothing by Friday (the short strangle expires, I keep all premium collected). If price starts to violate either strike I can at that point:

  • hedge with stock
  • buy back that piece of the trade, keep premium difference
  • adjust to next week expiration (would be for an additional credit)

Now for a look at a different trade. Here is $QCOM:

QCOM_Earnings_trade

Here is a breakdown of this trade:

  • I am short the November 8 weekly 70.5 Calls
  • I am long the November 70 Calls
  • This was done for a $.42 debit so this is my Risk in the trade

In after hours trading price has fallen under $68 so the weekly Calls will expire this Friday if this action remains. I will then be Long the November 70 Calls (expire next Friday). Several things can happen by then that could improve the outcome for these Calls:

  • The stock could recover allowing me to get some value the Calls
  • The stock could recover allowing me a chance to create a Call Spread

 

One thought on “A post-earnings trade review

  1. As noted above, I am taking the step to short stock in After Hours for $SCTY as it breaks the $58 level. This is just a hedge in case there is further downside (adds to the cushion in the trade).

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