mortlightman 10:00 am on Wednesday, May 1, 2019

Jeff

How do you decide if for earnings how you do the different strategy’s?

Jeff 10:36 am on Wednesday, May 1, 2019

The amount it has moved in the past, the price of the options, the premium attainable compared to risk.

As I explained in the webinar, Double Calendars are good when you can have a reasonable expectation of a minimal move, and/or a retracement after the first day if there is a big move. I also look for a profit that is at least equal to the risk, preferably closer to twice the risk.

I look to buy a straddle on only lower priced stocks, as premium is too high on stocks over $80. I also want to see the breakeven threshold to be at least 25% less than the average historical move. Today I looked at $W (Wayfair), because it is a big mover. But the stock price is $165, so the straddle would cost about $20.00. I don’t want to risk $2K, when there’s a chance the stock wouldn’t move at all and I’d lose most of it. Plus, I would need a $20 move which is 12.1%; the average move has been 14.0%… I’d prefer the breakeven be lower than that.

A lot of it is just guesswork and gut. By no means can you always make the correct decision. I lost on GOOGL this week because it usually does not move this much. But I limited my risk by selling fewer condors than usual, since the max loss was high.

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