I must say I was expecting a decent rebound after the sell-off in the past week so I did not roll my positions down, which paid off today.
What I am hoping for is that the rally continues for a couple of more days as I am long on a few stocks.
My Nike trade from yesterday turned out much better than anticipated so hopefully my today's earnings trade will also work out just fine.
For those, who are new to my daily market comments, I place and document one trade a day with the objective of helping everyone learn how to trade options.
What's my trade for today?
#KMX (#CarMax) calendar spread. The idea with the calendar spreads is that we are trying to take advantage of the higher volatility on closer expirations. As we can see on the table below, the IV for the Dec 23 expiration is 228% while it's 69% for the Feb. It means that the options in Dec are far more expensive in relative terms than the options in Feb. Also, the Dec 23 options lose their value very quickly as they expire in 2 days while the Feb options are expected to retain their value for longer.
Trade Type: Calendar Spread
Expiry: 17 Feb
IV Rank: 84.4
Cap Req: $178
Annualised Prof at Expiry: ?
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.