Live: Wednesday, April 19, 2017

4/19 – 2:30 p.m. New York time

I have entered three new positions today: CSX, EBAY and QCOM. The last symbol, QCOM, was added as a prospect shortly before the analysis; the new tactic I’m trying, described below, allowed the use of a better options grid.

I also exited three symbols, below my target of 25% of maximum potential earnings but still with good returns, in order to free up cash in my account for the trades remaining this week.

The exits were C, EWZ and WFC.

4/19 – 12:25 p.m. New York time

I shall be trying something new in my earnings plays today and the rest or the week: Using a closer expiration time than I have been.

The idea comes from Monday’s “Ryan and Beef” segment on TastyTrade. You can watch the 29-minute segment here.

My practice on short options spreads is to hold them for between 30 days and 60 days until expiration. Ryan and Beef argue that earnings plays should be treated different, with the expiration date being that nearest, and of course after, the earnings announcement.

So for today’s and Thursday’s trades, I would use the April monthlies, which expire at the end of trading on Friday.  For Friday’s trading, I would look to the weeklies expiring April 9, or if no weeklies are available, then to the MAY monthlies.

Short spreads rely on time decay to bring the price of the options down and thereby generate a profit. Earnings, Ryan and Beef argue, rely rather on the loss of interest after the event outcome is known to cause implied volatility to fall and therefore push down the options price.

It fits in well with what I have observed with earnings plays. If the positions becomes unprofitable after the announcement because of a sharp move in the price of the stock, then the position rarely recovers, instead keeping funds tied up that could better be used in pursuing other trades.

So let’s see how it works on the ground. It should be interesting.

4/19 – 10:10 a.m. New York time

Both prospects — CSX and EBAY — continue to qualify as potential trades. I shall post analyses later today.

4/18 – 8:45 p.m. New York time

I’m looking at two potential earnings plays for action on Wednesday: CSX and EBAY.

By Tim Bovee, Portland, Oregon, April 18-19, 2017