The market is tumbling but my accounts are on fire due to an awesome sequence of earnings plays this week.
What's an earnings play?
Publicly trading companies have to announce their performance every 3 months. Because there is lots of uncertainty leading up to the earnings the volatility of the given stock is always very high. After the earnings the stock may or may not move much but the volatility tends to collapse as a result of known performance. This volatility collapse can generate significant profits for the options traders.
So what's my trade for today?
#SQ earnings with a wide Dec strangle. Considering that the stocks can move a lot, I prefer to go with at least 2x the expected move. In fact, sometimes I look for the 5 deltas, which means that the probability of success is about 92%.
SQ Daily Chart
Trade Type: Short Strangle
Strike: $37.50 / 72.50
Expiry: 16 Dec
IV Rank: 58.4
Cap Req: $540
Annualised Prof at Expiry: 354%
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.