The volatility is slowly coming back down but still very high, which means there is loads of opportunity for options traders to sell premium (it's a term to describe when a trader sells options). However, the challenge is the earnings season.
Selling options right before earnings could yield quick profits due to the collapse of volatility but the risk of outlier moves is too high. For this reason, there is no statistical advantage in this strategy and traders need to be very careful which papers they hold through earnings.
Today I was finally able to close my X position after keep adjusting it since February. As we can see it on the graphical representation of my journey, the stock went through huge swings making it very difficult to keep the position alive. In the end, it produced 30% annualised return.
So what's my trade for today?
Despite the obvious risk, I occasionally do play earnings so I decided to try my luck with UAL. I selected a wide strangle (sold a put and a call) expiring in November hoping that the stock will remain between $28 and $46.
Trade Type: Short Strangle
Strike: $28 / 46
Expiry: 18 Nov
IV Rank: 50.5
Cap Req: $372
Annualised Prof at Expiry: 206%
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.
Let me know what you think.
Closed at $0.15 for an annualised profit of 169%.
Closed the put side and rolled down the call side for no additional credits.
Total credits: $0.65.