A Strategy for the Rest of Earnings

By the end of Thursday, I found myself in all the names I had mentioned during the day. I kept the trades very small across the board and still managed to tweet out the additional late ideas for LinkedIn (LNKD) and Coinstar (CSTR) well before the close, but there has been a pattern emerging on many of these high-flyer, high-beta, or high-short-interest names. Anyone who trades options around earnings is aware of the implied volatility implosion that occurs after the earnings regardless of the move. This isn't new. But the advent of weekly options is still fairly new, which has added additional room on the playing field for different approaches and strategies. It has also added to IV implosion risk for those getting long options in front of earnings.

Earnings from last night and into early next week have the benefit of this weekly type of feel since monthly options expire very early this month on the 15th. Although I will take directional trades, I am finding more preference in the IV implosion trades, but approaching them in a manner that defines risk. In other words, I don't want to outright sell the options and hold a naked call or naked put or both, like selling short a strangle. A huge move there can be killers, so I want to try to limit or eliminate the high-risk portion of the trade. I want to try and limit the risk associated with no move or a very small move when a big move is priced into options, such as the move we saw in Amazon (AMZN)....458 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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