Trading Options at Expiration for Big Gains
Published on July 21, 2013
Published on July 21, 2013
Trading Options at Expiration can bring big gains. How?
Equity and index options expires on Fridays (weeklies) and third Fridays of each month (for monthlies). As options expiration approaches, time value component of the option price approaches to zero creating a multiple trading opportunities. Jeff Augen has actually written a complete book on trading options at expiration. That excellent book can introduce you to many strategies that you can use to trade price distortions that appears on expiration day.
However, at OptionPundit, we would like to trade Options at Expiration especially when it coincides with Earnings announcement thus increasing our chances of success. For information, We trade all kinds of earning trades and been doing so for almost 28 quarters!!
- Pre-earning Direction and Volatility based Options Trading
- Through earning and
- Post earning Options Trading
Usually Pre and through earnings fall into “income trading” and #3 falls into as we define “speculative trading”. The reason why it is called speculative because though risk/rewards are huge but the occurrence of a succesful event is not sure (even though we have a large winning ratio).
Here is an example of our very recent trade on Google (GOOG) which generate +278% to +372% gains, all within a day!
User-1: +278% gains
And from user-2: +372% gains
So how did we do it?
It is actually a simple strategy where we purchased an Out of the Money Strangle on GOOG after earnings were announced. Based on our assessment, we reviewed that GOOG’s post earning move will be sufficient to pay for owning a strangle.
What is a strangle option strategy-
The long strangle, also known as buy strangle or simply “strangle”, is a market neutral strategy in options trading that involve the simultaneous buying of out-of-the-money put and a out-of-the-money call of the same underlying stock and same expiration date.
The long options strangle is an unlimited profit, limited risk strategy. If you have any questions pertaining to this STRANGLE strategy, please feel free to e-mail me at-> ask@OptionPundit.com and I shall be glad to answer your questions.
Trading such strategies is just one of the strategies that we use to capitalize on opportunities in Options market. And in fact, we don’t even count these profits into our official OP Income Newsletter performance.
Our primary focus is to trade market neutral income generating spreads for example Credit spread, Iron Condors, Calendar spreads, Back Spreads, Butterfly spreads and many more in a way that increases our probability of success as we structure our trades using Implied volatility as main factor (not direction).
If you would like to benefit from our 65+ months’ experience to find such trades and grow your profits steadily, you may want to join our OP Income Newsletter. Currently there is no waiting list Fee and you will have immediate access of all historical trades, adjustments, commentary etc.
Profitable Trading, OP