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The short strangle
incase priceline made some crazy move like $70
then the priceline strangle one of these
one of these options would have protected us to some extent
and that's why you saw is sort of having very steep loss on the graph
you saw that the graph had become somewhat of a
mushroom talk so that exactly what it was the one we want to lessen
our risk exposure so we bought that so we're perfectly willing to lose
this 9,000 but you can see that you've lost only 7,000 because
we recover
2,000 out of that this morning
and
so people fully prepared to lose that 9,000
if we could make enough profit on this and i also mentioned that
i've be happy with the profit of about $10,000 on this trade
but what ended up happening is we ended up making more than that we
ended up making about 16,000 on this trade
but the trade was successful
because we identified
that there was a mispricing of Volatility Crush in the May cds
so you've gotta watch out for all you've got to keep your eyes and ears open for
these kind of things because
that's what creates a blockbuster trade this is obviously a blockbuster trade
that happen in one day we made $16,000 on this trade
so those kind of opportunities don't come by all the time
but if you keep your eyes and ears open it's possible to hit one of those
and that's exactly what we did
you know there was no reason why the May
monthly cvs should have gone to a Volatility Crush of 69% or
70%
because the option cds that was impacted was the was the May weekly cds so there
was no reason why this was so high if you'll recall the June cds wasn't
around 40 or 41 so you know it's normal range looks like it's about
between 37% and 40%
and it that just gone 40 or 42
now that's understandable a couple of percentage point increase in volatility
is perfectly understandable
but to increase by 25 points seemed like an opportunity that we
should in pass up on
so this is a
this is an earnings play so what happens in earnings play are
that Volatility during earnings gets pumped up
and usually it's the front cds that gets pumped up and in our case the monthly
cds also got pumped up so we decided to take advantage of that
situation so we
went through Volatility Crush we closed a position and at what we did was
we made a nice $16,000 profit
and this obviously has turned out to be a fantastic trade
but you have to be
careful because
playing the earnings game is not a simple thing i would highly recommend you do
such kind of trades on paper money
and please do with the
and if you do it with the real money then you should you should put in
small sizes i think yesterday we went i didn't realize that we've putting
10 contracts and that's because priceline short strangle is a high price talk
so it was a
pretty risky well it was risky in the sense it was a large play
but the risk i thought was less because
what were the chances that priceline would move $66 up because
that was all break even if you recall our break even was the 725
plus 66 and 725 minus 66 so i didn't think priceline
would make such a kind of move and so