Earnings Trade Design starring VMware and Polaris Industries

As we head into the heart of Earnings season, my focus on this segment of my trading increases – it is where I find some of the best opportunities for new trades. I use Options as a key component to most trades for a variety of reasons: lower capital requirements & the flexibility to participate in the post-Earnings price reaction.

It is an important step for each trade to do a thorough review - and sometimes I like to share that info along the way (from trades that are still in progress). I have 2 new trades that I did yesterday and I thought I would review where things stand now that the Earnings event is over.

VMware ($VMW):

  • I am Long the October 24 weekly 91/95/82 Risk Reversal Call Spread
  • This means I am long the 91/95 Call Spread and short the $82 Puts
  • This trades takes margin this week (or until the short naked Puts are closed)
  • The trade was done for a .05 debit

VMW_G

The above chart shows the close from yesterday. The current price in pre-market trading is $84 so I will need to monitor the short Put strike. It does not appear that I can get any value out of the Call Spread.

Polaris Industries ($PII):

  • I am long stock at 146.84
  • I have a November 160/145/135 Collar Put Ratio
  • This means I am short the $160 Calls (covered by stock) and long the 145/135 Put Ratio (1×2)
  • This trade does take margin due to the Put Ratio (until at least 1x of the short $135 Puts are closed)
  • This trade was done for a .55 credit

PII_B

The above chart shows the close from yesterday. The current price in pre-market trading is $149 but there has been very little volume (normal for this stock). With this trade design I can participate on any move up to $160 and I am protected down to $135 (+/- the credit received).

Trading Activity update

Here is a list of my trading activity today:

$UVXY  I am short this ETF on the $40 break (Sell Short Stop trigger, a hedge for the short November Option trade)

$CELG  I initiated a new long stock Fab 5 position today (Buy Stop at $90 trigger)

$TSCO  The short stock piece in the Submarine Basket was covered today. The November option pieces remain

 

Earnings Trade Ideas for Apple & Chipotle

For $AAPL:

Long Oct 24 weekly 102/104/95 Risk Reversal CS. This means you are long the 102/104 Call Spread and short the $95 Puts. This trade can be done for a small credit, takes margin, and you must be comfortable owning at $95 (or you can adjust to next week – or further out expiration if desired/necessary)

For $CMG:

Long the October 24 weekly 650/675/700 Call Fly with Short $575 Puts. This trade can be done for a $1.75 credit (and takes margin)