Recap of ER Season Week 2

...and opportunities for upcoming week.

See last week’s post for the pre-announcement for the trades reviewed in this post here.

As many readers of this Substack know, I am a probability trader that bases most decisions on historical performance of a rigid mechanical methodology. During earnings season, I take advantage of the volatility crush of options on stocks that have historically low movement over ER. There are a few twists regarding how this is done as well as which opportunities I will take, especially with regards to position size (premium subscribers have access to the full methodology - video links will be posted again in the premium section today).

This past week I took four out of five of the pre-announced trades from last Sunday - GS, ABT, AXP, and TSM and had a win / loss ratio of 75%. Here are the summaries:

GS

GS reported earnings before market close on Tuesday, 18 April. Therefore, timing of entry was just before close on Monday. I sold two GS Apr21 $325/327.50/352.50/355 Iron Condors for $0.83 on $1.67 risk each bringing in a total of $166 credit against $334 risk. This is normally higher risk than my stated trade plan of risking no more than $250 per earnings play. I will admit that I made a position sizing mistake on this trade by selling two contracts and not one.

The exit strategy for iron condors during earnings season is to clench your teeth and hold on until just before close following earnings. On rare occasions, I’ll break the rules and hold an additional day. On GS, I exited in the last 15 minutes of the trading day on Tuesday.

ABT

ABT reported earnings before market close on Wednesday, 19 April. Therefore, timing of entry was just before close on Tuesday. I sold three ABT Apr212 $100/101/108/108 Iron Condors for $0.34 on $0.66 risk each bringing in a total of $102 credit against $198 risk.

ABT had an outsized move after earnings that far exceeded the wings of the iron condor. My short $108 calls were surprisingly assigned. I ended up exercising my long $109 calls on open. I let the put side of the iron condor expire worthless.

AXP

AXP reported earnings before market close on Thursday, 20 April. Therefore, timing of entry was just before close on Wednesday. I sold one AXP Apr212 $157.50/160/170/172.50 Iron Condor for $1.10 on $1.40 risk each bringing in a total of $110 credit against $140 risk.

IV crushed and AXP closed on Thursday down 1.01%. I exited the iron condor near close for $100 in profit.

TSM (as an alternate to LRCX)

TSM and LRCX reported after market close on Wednesday, 19 April. Given the higher risk of a LRCX iron condor (over $300) and the fact that I was also playing AXP at the same time, I decided to use sell four TSM Apr21 $83/84/90/91 iron condors for $0.40 on $0.60 risk each bringing in a total of $160 in credit vs. $240 risk.

TSM reported and the stock moved a little over 2% on Thursday, staying well within the wings of my iron condor. I ended up holding the position through Friday and allowed it to expire worthless.

Total profit for this past week was $166 on a total of four trades. Green is green.

For premium subscribers, here are next week’s opportunities:

TXN (past performance 75% win / loss ratio over past four earnings)

Reports after market close on Tuesday, 25 April. Trade entry for EOD on Tuesday.

MA (past performance 75% win / loss ratio over past four earnings)

Reports before market open on Wednesday, 26 April. Trade entry for EOD on Tuesday.

ROKU (past performance 75% win / loss ratio over past four earnings)

Reports after market close on Wednesday, 26 April. Trade entry for EOD on Wednesday.

AMGN (past performance 75% win / loss ratio over past four earnings)

Reports after market close on Thursday, 27 April. Trade entry for EOD on Thursday.

Here is the previously recorded video on earnings iron condors: