The Bottom Line:
- Earnings announcements create opportunities for option trading.
- Long strangle is a strategy to capitalize on implied volatility rise.
- Simulated trades on Keysight Technologies (KEYS) and Ross Stores (ROST).
- Understanding the risk profile and impact of implied volatility on trades.
- Closing trades before earnings to avoid volatility collapse.
Earnings Announcements: A Gateway to Option Trading
Implementing Long Strangles on KEYS and ROST
I’ve placed a couple of long strangles on Keysight Technologies (KEYS) and Ross Stores (ROST) using thinkorswim paperMoney. PaperMoney allows you to place trades in realistic market conditions without risking real money. This simulated performance in paperMoney does not ensure the same performance in a live trading environment.
Analysis of Trades Over Time
After setting up the trades, I monitored them carefully, considering factors such as implied volatility, stock movement, and potential outcomes. For example, the KEYS trade showed positive movement, driven by shifts in both stock price and implied volatility. However, ROST displayed losses due to declining implied volatility, despite some stock price movements.
Results on Earnings Day
On earnings day, both companies reported after the market closed. The long strangle on KEYS resulted in a net profit of $152.50, primarily supported by the put side performing well amidst falling stock prices and rising implied volatility. The long strangle on ROST faced challenges despite a stock price drop and slightly higher implied volatility, ultimately resulting in a loss.
Capitalizing on Market Volatility with Long Strangle Strategy
Trading Performance Analysis
After setting up the trades on KEYS and ROST, I closely tracked their progress over time. Factors such as implied volatility, stock movements, and potential outcomes were considered throughout the monitoring period.
Earnings Report Outcomes
On the day of the earnings reports for both companies, we observed contrasting results. The long strangle trade on KEYS yielded a net profit of $152.50, driven mainly by the put side’s performance amid falling stock prices and rising implied volatility. Meanwhile, the trade on ROST faced difficulties despite a stock price drop and a slight increase in implied volatility, ultimately leading to a loss.
Case Study: Keysight Technologies (KEYS)
Trade Progress Monitoring
After setting up the long strangle trades on KEYS and ROST, I closely monitored their progress over time, considering various factors such as implied volatility, stock movements, and potential outcomes.
Earnings Report Outcomes
On the day of the earnings reports for both companies, the results were analyzed. The long strangle trade on KEYS yielded a net profit of $152.50, primarily driven by the put side’s strong performance amidst falling stock prices and rising implied volatility. However, the trade on ROST faced challenges despite a stock price drop and a small increase in implied volatility, resulting in a loss.
Analyzing Ross Stores (ROST) Through Simulated Trades
Trade Progress Evaluation
After initiating the trades on KEYS and ROST, a close examination was conducted over time. Various factors like implied volatility, stock movements, and potential outcomes were carefully assessed throughout the monitoring period.
Earnings Report Results
During the earnings report day for both companies, the outcomes were reviewed. The long strangle trade on KEYS showcased a net profit of $152.50, primarily influenced by the put side’s performance in light of declining stock prices and escalating implied volatility. Conversely, the trade on ROST encountered challenges despite a decrease in stock price and a slight uptick in implied volatility, ultimately resulting in a loss.
Mitigating Risks: Understanding Implied Volatility Impact and Trade Management
Insights from Active Trade Monitoring
Monitoring the progress of the long strangle trades on KEYS and ROST revealed interesting developments over time. Factors such as implied volatility shifts, stock price movements, and potential trade outcomes were carefully analyzed throughout the monitoring phase.
Earnings Day Performance Analysis
On the day of the earnings reports for both companies, a detailed analysis of the trade outcomes was conducted. The long strangle trade on KEYS generated a net profit of $152.50, primarily supported by the strong performance of the put side amidst declining stock prices and rising implied volatility. However, the trade on ROST faced challenges despite a decrease in stock price and a slight increase in implied volatility, leading to a loss.
