Earnings Trades – Options Expiration review for the month of May

I exited a large % of the Earnings trades this week (usually the design when using monthly options). I performed a post-trade review – the usual practice – and here is a brief look at the performance of the exited trades:

May_OpEx

A few things I noticed this cycle:
  1. Almost all the Call Flys expired worthless. In all but one of the trades involving a CF the short Puts expired as well (BWLD had to be hedged with stock, was called away)
  2. On a % basis, I had a slight increase in post-Earnings trades
  3. Stock trading around an Options trade (hedging, tagging along) continues to be crucial in maintaining/increasing a gain in the trade. Can’t stress this point enough: it is so important to be ready to hedge with stock in after-hours or pre-market when using Options in an Earnings trade (even when you are simply long Options as well)

– DM 11:30 AM CST

 

Position Updates

Due to an increasing amount of questions and comments regarding my positions & trading I recently created a new tab on the Blog for recording my Positions. The goal is to update the info on each account or basket daily for any changes that occur.

Newly added this week that survive to the weekend:

$RENT $WM $XLF $PFE $GMCR $YUM $ZBRA $CTRP

Exits:

$MNST $QLYS $RMD $RL $PTBI Earnings: $CNC $TMO $ORLY $EW $BWLD $NXPI $HAR $EL $RGR $MCK $KSS $LOCO $KING

Here is the Summary:

Positions_05162015

– DM 10:00 AM CST

 

A discussion on “probabilities”

I often receive negative feedback from traders regarding a perspective that I show on a particular chart. Although this should be expected – people see what they want sometimes – I wanted to focus on the topic of probability.

When I consider the price action in a stock I want to consider what traders are thinking on both sides of the fence. When I use RSI to keep things simple, I am looking to answer this one question:

What is the probability of price movement now?

To illustrate I want to use a Daily chart of GMCR to show what some traders used to enter this stock last week:

GMCR_B

When you consider the history of price, what happened each time RSI touched 30? From a probability stand point, it seems easy to follow this. Could it have remained weak, gotten weaker? Sure. The point here is: what is the probability for price movement next?

– DM 1:10 PM CST