So I want to talk a little bit more
about my idea of
selling strangles
right before earnings.
So Walmart is reporting earnings
tomorrow morning and
this is why today I entered
a strangle.
And let me show you exactly what
I do. As you know, this is a trading
idea that I've been working on.
Right now I have placed around 9
or 10 trades and I'm still testing
it to see if I can turn this
trading idea into
a valid trading strategy.
Walmart is reporting earnings
tomorrow morning before
the bell.
And this is where I decided to
sell a call way
above the current market, Walmart is
trading at $128, so
at $138, and at the same time
selling a put for
$117. So I sold
the $138 call
and the $117
put for
$0.85.
So this means it is
$85 per option.
Now you have seen it usually
I like to trade larger size,
but since I'm testing the idea right
now, I'm only testing it with one
option. Usually, my trade
size is around 30
to 40 options, so
this would be around $2,400
to $3,000
that I'm looking to make with the
trade. And the bet is that by
tomorrow Walmart will
still be somewhere in between there
so that tomorrow I
can sell, or can
buy this back, so my profit target
here is 70%
of $0.85.
And let's see if we take 85
times, I want to make $60, so
my profit target is
$60 that I want to make on this
trade. So this means
that I should be able to buy
it back at $0.25, and
that is the idea, that's what
I want to do tomorrow after Walmart
reports earnings.
Again, the idea here is that today,
volatility is high because nobody
knows what will Walmart report
tomorrow.
And this is why there is some
uncertainty in the market, and
whenever there's uncertainty, this
is when option premiums are high.
And as long as we stay right
here in between $138
and $117, we should
be just fine and premiums
should collapse.
And this is the idea thus
far, I've been doing it eight times,
and eight times it has worked like a
charm. I'm planning to test it for
at least over 30 trades
so this will here be trade number
nine that I'm doing with this.
Thus far, everything has
been a winning trade.
So let's take a look at this
position. I entered it this morning
and thus far it is doing
okay, we are up $28.
Keep in mind, my goal here
is to make $60 so
we are already halfway there after
only a few hours.
So I entered this trade this morning
at 9:30 Eastern Time, and right
now it is 3:50
Eastern Time, so within a few
hours I was already able to make
half of my money here.
So what I also did this morning, and
this is what I want to share with
you, I was starting
to look at a tool.
So this is a very, very,
very rough draft that I'm showing
you here, but I hope this helps.
So looking at Walmart, what
my earnings strangle calculator does
here, is that it is calculating
the ideal strike
prices, right?
So which strike prices should I
trade to be on the safe side
here? So what should be the call
right here?
Right? Where I came up with a 138,
what should be the put?
This is where I also saw, "OK, I can
get $0,85." So the
idea here is, as you can see, my
profit target, this is pretty much
what I already told you right now on
the screen. So I just put this
here into a little Excel
spreadsheet right now, only for
myself, because I'm still testing
the idea here.
And so the profit target is $60.
Now, this is a two-day trade,
so meaning that I would make $30
in a day. And again, $30 is not
exciting at all.
So this is where right now,
honestly, I'm evaluating whether
this strategy is making
sense. Because you see I have
a goal per day based
on an account size. So if I have a
$20,000 account, I want to make at
least $60 per day.
If I have a $40,000 account,
I want to make at least $120 a
day. If I have a larger account
like $300,000,
I want to make $900
a day. So you see, it's
very important that I hit my goals
to make it worthwhile
to have this risk.
So I was looking at a $20,000
account and this where I realized
that I could only trade one option
to be on the safe side.
So I would only make $30.
So here's the deal,
right now I will pursue
the testing, but
I'm a little bit concerned that
the way I've been trading it,
I cannot make enough money with it.
I mean, based on my goals, your
goals might be different.
But for me, my goal is to make
a 0.3%
per position, and I'm planning to
have multiple positions in the
account.
Anyhow, so I'm just
letting you look over my shoulder so
that you know what I'm thinking,
and how I'm going from trading
idea, over testing
to the rules of the strategy
and the actual tools.
Is this making sense?
Is this helpful at all?
Because you know the drill.
If it is helpful, click
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because my goal is
here to give you practical
information that you can use in your
trading right away, whether you
are new to trading or you have been
trading for a while.
If you are new to trading, it might
be worth looking at the Options 101
that I created for you.
It's free.
So if you if you're completely new
to options, do that before you
go into this a little bit more
advanced strategies.
But hey, if this is making sense,
then we will talk more about this
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