Earnings season is in full steam this week so it will be interesting to see which way the market is going to go.
Looking at the SPY daily chart I would expect it to drop a bit but the market is random so who knows.
So what's my trade for today?
#IBM. Everyone knows IBM. It used to be the Apple of the market for a long time. Earnings takes place after close today so I decided to try something I don't normally do: a calendar spread. The way it works is that we sell a front month (closer) option and buy the same expirations with in the next cycle (back month).
Why would we do this? Because the front month, due to the earnings, has much higher IVR (volatility), therefore it's more expensive per day than the back month. After earnings the volatility is likely going to drop for the front month a lot more than for the back month so we can expect to pocket a bit of profit.
Also, because we bought the same strikes as the ones we sold, our risk is very minimal.
IBM Daily Chart
Trade Type: Calendar Spread
Strike: sold Aug $135 / 140; bought Sep $135 / 140
Expiry: 19 Aug
IV Rank: 54.6
Cap Req: $218
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.